Small business that supplied frontline workers in pandemic says healthcare group withheld $1M

Samantha Kummerer Image
Thursday, July 28, 2022
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Dream turned nightmare: Alamance County business owners say they were stiffed nearly $1 million and had to close their business.

GRAHAM, N.C. (WTVD) -- It was a dream that turned into a nightmare.

Michael Watson and Nakisha McCain always wanted to start their own business. Their idea to start a staffing agency transformed from an idea during a meeting in a McDonald's to an actual office space in 2019.

"In January, we didn't get our first contract until August. We sat there... well (Nakisha) sat there," Watson said.

Their Alamance County-based business, Focus Staffing, began slowly. Both Watson and McCain eventually quit their full-time jobs and took pay cuts to invest fully in the business. They connected workers and businesses across multiple industries, and then the pandemic hit.

"It was during COVID and they couldn't get (any) workers," Watson recalled about Medical Facilities of America -- the first company to seek health care staffing from Focus Staffing. "They called us and said, 'We need some help,' and we were like, 'We've never done LPNs or health care before,'"

Focus Staffing started out filling the need at the Alamance Health Care Center but soon their contracts grew.

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"We started out with one contract with them and then we picked up 28," McCain said.

Over the next year, the duo provided around 1,400 frontline workers to health care facilities across North Carolina and Virginia during the height of the pandemic.

"I mean we were recruiting, recruiting, recruiting. No sleep, no weekend, no time off," the pair remembered.

And the work was exciting. Finally, their dream was taking off.

"It was good, it was really good, but then the payments started coming in slower and slower," Watson said.

Since Focus Staffing signed the first contract, Medical Facilities of America changed ownership to the Vita Healthcare Group. Watson and McCain said the transition was smooth; until it wasn't.

"We're supposed to receive our pay within 30 days and then it was becoming 120 days and now it's 8-9 months later," McCain said.

As a staffing agency, Focus Staffing would pay the health care workers and then eventually get reimbursed for those wages, but they said that reimbursement slowed and then stopped.

"This facility might say, 'OK, I'm going to send them $2,000,' but we're still owed $600,000," McCain explained.

Focus Staffing was also contracted with Capital Credit, a payroll credit company that helps provide funding to the staffing agency in between the lag of getting actually paid by the healthcare company.

"There was a slowdown in the payment cycle as well as a breakdown in the communication and that is in our business, that's you know, that's not good," said Lewis Merrifield, president of Capital Credit. "That's when the company in our situation you know, we can only get too deep, if you want to call it that, with a business where you -- where it starts worrying everybody."

Merrifield said Capital Credit was advancing funds to Focus Staffing who was paying its nurses but Capital Credit was also slowly not getting reimbursed and getting into the red.

"There's some point where you have to stop funding because we're not receiving payments as we should," Merrifield said. "There's a point where you can't go any higher in terms of the balance that's outstanding."

For Focus Staffing and Capital Credit, that moment came at the end of this past January.

Focus Staffing terminated its agreement with the company on January 27, 2022, according to a document obtained by the I-Team. The termination cited past due invoices.

"We were fighting for so long to stick with it because we didn't want to remove our employees from those medical facilities because we knew there was a duty to be done, so when it came to the decision to close the doors, we had no other choice," McCain said.

Emails provided to the I-Team revealed numerous back and forth exchanges of Capital Credit and Focus Staffing attempting to get updates on payments. In January, Capital Credit acknowledged receiving around $59,000 but stated they initially requested $400,000 of the owed amount be paid.

"There appears to be some kind of disconnect here," one email read. "Is this a cash flow issue with the MFA or individual facilities' bank accounts?"

What appears to be a representative for the company wrote "the bill payer company we use has a slower process. We are working with them to speed up the process."

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The next day, however, payment is still not received and Capital Credit writes that workers will have to be pulled for the rest of the week until they are paid.

MFA claimed miscommunication with dates around when payments would go out and blamed delays on the banks and shipper along with their bill-pay software. The business representatives continue to imply that payments are in the process of going out and the issue is bank-related.

Fast forward to March and problems receiving full payments persist with Capital Credit claiming many of the payments were still never sent.

"Only about half of what was committed was paid, and then payments stopped altogether when the contract was terminated on 1/27/22," an individual with Capital Credit wrote in early March.

Watson, McCain and Merrifield said months later they are still owed money.

"How are you just not going to pay an agency that supplied frontline workers to your facilities during COVID and then just forget about us?" McCain questioned.

Capital Credit filed a lawsuit against Vita Healthcare and the separate healthcare facilities that claimed they are owed close to $1 million.

"Despite repeated requests for payment, defendants, and each of them, have failed to pay and refuse to pay," the lawsuit filed in May stated.

The lawsuit goes on to state that Capital Credit has repeatedly tried to demand payment since February 2022 but Vita Healthcare and the facilities have refused to pay.

In an answer to the complaint, Vita Healthcare denied the allegations and stated that the claims were barred due to "the absence of an enforceable contract", "lack of good faith performance by Focus", and "a failure to comply with any valid agreements on the part of Focus", and "misrepresentation of contract terms."

In June, the Vita Healthcare Group made a motion to dismiss the lawsuit, which Capital Credit opposed, so the litigation is ongoing.

The lawyers representing Vita Healthcare Group in the lawsuit filed by Capital Credit declined to comment further.

Focus Staffing and Capital Credit aren't the only companies accusing Vita Healthcare of owing money.

Vita Healthcare is also accused of owing an Arizona lab more than $3 million for COVID-19 testing, according to court documents. The lab, Genetic Technological Innovations, filed a lawsuit in May against the health care company that claims it processed more than 34,000 COVID-19 tests across dozens of Vita's locations and has an outstanding balance of more than $3 million remains.

The I-Team repeatedly reached out to Vita Healthcare but has not heard back. The I-Team also could not reach anyone with the Medical Facilities of America.

In the meantime, Watson and McCain were forced to shut down Focus Staffing.

"I mean, we were bleeding out and we had workers coming up threatening us, and we had Google reviews, just terrible Google reviews," Watson said.

She said the delayed payments led workers to threaten and blame Focus Staffing, which led to lost trust among employees and a tarnished business name.

"At this point, it's not about the money, it's our name, it's our brand that has been affected tremendously," McCain said.

They've started a new staffing business and are once again slowly trying to build back a business.

"It was so depressing and there are still residual effects now because even though now we've moved passed that. It still bothers us," they said.