[T]he University of Vermont Health Network and others are seeking to acquire an embattled drug testing company in Burlington within less than a month, according to documents filed with state regulators.
The company, called Burlington Labs, owes $6.5 million to the state of Vermont to settle an investigation alleging it overcharged Medicaid, and it’s in default on a bank loan. The lawyer for the acquisition partners says the lab is now getting lower payments from Medicaid, inhibiting cash flow.
The UVM Health Network, the state’s largest hospital system, is among the would-be investors, according to a letter seeking emergency review filed Friday with the Green Mountain Care Board, which has jurisdiction over capital investments in Vermont’s health care system. James Crook Jr., a health information technology executive, is leading a group of unnamed other investors.
The legal applicant is Burlington Labs Acquisition LLC, according to the letter, a company registered in Delaware. Mike Noble, the spokesperson for the UVM Health Network, said the network doesn’t own the acquisitions company.
“We are part of it, and there’s a lot of other people involved,” Noble said Tuesday.
UVM Health Network’s lawyer, Spencer Knapp, is cc’d on the letter, and its chief financial officer, Todd Keating, is listed as a proposed board member for the company. But Noble said “arrangements are still being worked out” and he had no information on how much equity the UVM Health Network would have in the project.
Noble pointed VTDigger to a lawyer from Downs Rachlin Martin who filed the letter with the Green Mountain Care Board. That lawyer, Elizabeth Wohl, did not immediately respond to a voicemail Tuesday.
In a statement late Tuesday, Burlington Labs said, “UVM Health Network may be a minority investor in the transaction.”
The Green Mountain Care Board will discuss the matter Wednesday at 3 p.m. at the Capitol Plaza Hotel in Montpelier. The meeting will take place after the board finishes hearing from hospitals about their proposed budgets.
“There are employees involved here,” said Al Gobeille, the chair of the board. “There are patients involved here. This is a serious issue.”
Burlington Labs tests urine and saliva to see if a person has been using certain drugs. The facility’s major clients are doctors, hospitals, drug treatment counselors and courts, according to its website. The company’s statement said it has more than 130 workers in Vermont and 180 overall.
Burlington Labs also operates walk-in centers in Barre, Bennington, Middlebury, Morrisville, Rutland, St. Albans, and Springfield. It has offices in Massachusetts and Kentucky. A facility in White River Junction has been proposed, but the letter tells the Green Mountain Care Board that facility will not open unless regulators approve the acquisition.
Burlington Labs Acquisition LLC is seeking an emergency approval process, and asked the board “to declare this application uncontested and issue written notice granting a certificate of need without any further process.”
The letter says Burlington Labs is in dire financial stress that puts it at risk of not making payroll. The laboratory recently settled a case that alleged it overcharged Medicaid for services, according to the letter, and is about to default on a bank loan.
As for financing, the partners in the project would invest $4.5 million at closing, according to the letter, and the “University of Vermont Health Network is expected to make an equity investment at the initial closing and may also provide debt financing.”
If Burlington Labs Acquisition LLC takes over the company, it would pay the $6.5 million Medicaid settlement with the state and assume millions of dollars more in liabilities.
“The University of Vermont Health Network is involved because it believes that (Burlington Labs’) opiate testing services are vital to the communities that (the hospital system) serves,” the letter says.
“A rapid purchase of the business by the applicant will allow it to continue the vital services that the business provides to the community without disruption,” the letter says. “Burlington Labs serves a critical need in Vermont’s efforts to combat substance abuse, especially opiate addiction.”
Burlington Labs Acquisition LLC was created specifically for the purchase and has not yet been registered in Vermont.
(Correction: An earlier version of this story didn’t mention the other investors.)
