The NCMS has heard from many physicians and practice administrators recently about claims sent to Medical Development International, Inc. (MDI) at various times in 2011 and 2012 that remain unpaid. Practices have cited difficulties with contacting MDI, and with obtaining any assistance from the federal Bureau of Prisons. Accounts receivable commonly number in the five or six figures; one North Carolina health system has reported $8 million in unpaid claims.

After looking into this situation, NCMS has learned that MDI has no money and has been placed into a court-ordered receivership.

Until this summer, MDI held the federal contract for arranging medical services for Butner prisoners and making payments to medical practices that provided the care. Many North Carolina medical practices signed participation agreements and granted discount prices to MDI.

Over the years, MDI had received more than $37 million in loans from Wells Fargo. Those deals gave the bank rights in MDI’s assets in the event MDI could not repay its loans. This turned out to be the case. In March, Wells Fargo successfully sued MDI for defaulting on its loans, and attributed MDI’s downward spiral to mismanagement and lavish personal spending by the CEO. Along with a $30 million judgment, Wells Fargo also won a court-appointed receiver, who is now taking control of MDI’s assets, laying off MDI employees, and restructuring the organization.

Because Wells Fargo is a secured creditor, any money that emerges from receivership will go towards satisfying its loans; however, the loans are not expected to be fully repaid. All other claims, such as those from physicians for services rendered, are secondary and even more unlikely to be paid by MDI.

NCMS has requested that the receiver notify all unpaid medical practices about their pending claims, but we are not confident this will happen. We will continue to monitor the receivership process and explore all other avenues to address the situation. We will be sure to notify members if anything changes or if we learn something new. Until then, we believe that any efforts to pursue payment from MDI on Butner claims would be futile.

 Review more press coverage of MDI:

Company Officials: MDI Could Fold By Spring, St. Augustine Record (September 21, 2012)

Willich Out at MDI, Company Must Pay $30 Million, St. Augustine Record (September 17, 2012)

Wells Fargo Wins $30 Million Court Judgment, Charlotte Business Journal (September 12, 2012)

Wells Fargo Gets Medical Development Restructuring Officer, Bloomberg News (April 11, 2012)

Willich Company, Wells Fargo Sue Each Other, St. Augustine Record (March 26, 2012)