Duane and Breanna Murphy were devastated last winter when their first round of fertility treatment at Oregon Health & Science University did not result in a pregnancy. The Vancouver couple took solace in a new puppy and the knowledge that they had a second chance.
They had paid $22,000 upfront for two rounds of basic in vitro fertilization.
But the Murphys are among at least 30 other OHSU patients and thousands more nationwide whose money, dreams of parenthood — and in some cases even their eggs and sperm – were caught up in the collapse of a program intended to help finance fertility treatments.
A company, IntegraMed Holdings, that operated the finance program called Attain IVF, filed bankruptcy last May. IntegraMed went bust owing $19.5 million to thousands of individual fertility patients across the country, claimed lawyers representing some of the patients. What’s more, the lawyers alleged that IntegraMed “improperly spent” another $20 million in customer deposits in the months and weeks leading up to the bankruptcy filing.
In a year dominated by the pandemic, the plight of the individual fertility patients and their misappropriated millions received virtually no outside attention, from consumer advocates, journalists or anyone else. The matter might never had come to light but for a handful of fertility clinics that emerged as important patient advocates in the IntegraMed bankruptcy.
OHSU was not one of them. Though OHSU itself was owed money by IntegraMed and 30 of its patients had a financial interest in the outcome, OHSU didn’t even hire a lawyer to monitor the case.
Internal OHSU records obtained by The Oregonian/OregonLive through a public records request indicate that the institution didn’t have ready answers for its patients, either.
“People are calling me and freaking out,” Andrea Reyes, a financial counselor for the OHSU clinic, told her colleagues and managers in a June 3 email. “I’m still sticking to the script and using COVID as a reason, but do we know what’s going on?”
The Murphys, who were prepared to being their second round of IVF, say OHSU didn’t inform them of the IntegraMed bankruptcy for four months, when they received a “To whom it may concern” form letter.
After spending six years in the U.S. Army and 24 months on combat deployments in Afghanistan, Duane Murphy said he never thought he and his wife would have to fight another battle over fertility treatment.
“We knew this was not going to be the yellow brick road,” he said. “But we didn’t think we would encounter this. It’s been really stressful.”
OHSU ultimately decided to provide the services its patients paid for, even if it has to eat the costs. But according to the Murphys, OHSU balked at the notion of also paying a partial refund promised under the Attain program to the couple were they unsuccessful in having a baby.
Fertility experts warn that the lasting impact of IntegraMed’s collapse is likely more personal than financial. Fertility treatment is physically and emotionally taxing. For many, the treatment represents their last and best hope to start a family.
The last thing a fertility patient needs is more stress, delay and uncertainty, said Dr. Brandon Bankowski, head of ORM Fertility, a Portland clinic.
“The real toll here is the time and opportunity lost,” Bankowski said. Fertility patients have a short window of opportunity.
“If you don’t get pregnant in eight to 10 months,” she said, “the odds of it happening go way down. So you have to get it right.”
A trusting relationship
In vitro fertilization felt like science fiction in the 1970s, when scientists created the first babies by surgically extracting a woman’s eggs, fertilizing them with a man’s sperm outside the body and then implanting the embryos back into the woman’s uterus. Today, it’s a $5 billion-a-year industry.
IntegraMed was one of the few national players in the field with two major businesses: It hired itself out to manage the business side of a number of fertility clinics. It did the accounting, it paid the bills, it managed HR. In this role, IntegraMed had access to the clinics’ money.
IntegraMed also ran the Attain IVF financing program. OHSU’s connection to IntegraMed was limited to the Attain program, which it had offered to its patients as an alternative payment plan for 10 years.
The hallmark of the Attain sales pitch was a money-back guarantee. The Murphys paid $22,000 up-front to Attain on the promise that Attain would reimburse OHSU for the medical services it performed and would partially refund their money if the treatment didn’t result in the couple having a healthy baby.
That prospective refund was an attractive sweetener for the Murphys and thousands of other couples. Many insurance plans don’t cover IVF, so couples risk their financial nest egg on their dreams of starting a family.
It’s a largely unregulated field, and customers are hugely motivated.
“You take an industry with a lack of oversight and you add couples who are desperate to become parents, who will go to almost any length… that’s not a good mix,” said Joyce Schwensen, a Seattle surrogacy and adoption lawyer. “People are vulnerable. They want to believe.”
At OHSU, 107 patients used the Attain IVF payment option over the last two years. That’s a tiny fraction of the 9,337 total patients treated at the clinic in that time. But it also shows OHSU’s Attain problem could grow.
At this point, OHSU knows that 30 of its patients have been impacted negatively due to their decision to go with Attain. OHSU doesn’t have a clear handle on how many more Attain patients will surface in the future, said Elaine King, administrator of OHSU’s women and children’s operation, which includes the fertility clinic.
OHSU officials said they never had reason to question IntegraMed’s financial strength. If they’d done some basic due diligence they would have learned that IntegraMed had suffered some significant setbacks.
IntegraMed was owned by Sagard Capital, a Montreal private equity fund, which was in turn owned by a publicly traded operation called Power Corp., also in Montreal.
Power Corp.’s financial filings from 2017-2019 show repeated references to IntegraMed’s plunging value and accounting charges that reflected its decline.
The fertility business, like virtually all elective medical procedures, took a huge dive after the arrival of the coronavirus. But even before that, Sagard officials said, the company’s financial performance was “challenged” by “several unsuccessful acquisitions and the costs of required reinvestment in the company.”
By last year, Sagard had decided to jettison its fertility subsidiary. An attempted sale fell through and on May 20, IntegraMed filed Chapter 7 bankruptcy. That’s the route businesses take when they plan to shut down and liquidate instead of attempting to reorganize.
While King and her OHSU colleagues wondered how to proceed, a co-worker urged them to come up with a plan and quick. They had 87 new cases set to begin treatment in June.
“There are many patients wanting an Attain package,” said Reyes, who is an OHSU financial counselor.
When IntegraMed went bankrupt, the promised refunds to patients were off the table. The clinics would also take a hit. The reimbursement OHSU was expecting for its work on the Attain patients went down the drain with IntegraMed. King, the OHSU administrator, said that will cost the clinic at least $200,000.
When the OHSU management team learned of the bankruptcy – from their own patients — their emails reflect stunned surprise.
“I just found out that the whole office has been fired and they have filed for Chapter 7 Bank(ruptcy),” King said in a June 3 email. “We have received several calls from very upset patients and I am not sure how we should proceed… What in the world are we going to do to get paid?”
OHSU wasn’t alone. The failure of IntegraMed reverberated from Seattle to South Florida.
Explaining to new customers that Attain was no longer available was relatively straightforward. The real problem was what to do about patients who had completed their treatment or were in the middle of it. They had paid thousands of dollars to IntegraMed, fully expecting the company to honor its end of the deal.
That was precisely the position the Murphys were in. They are halfway through the fertility treatment they paid for.
For Krysta and John Glass, of Tampa, Fla., it was another setback in what has been a difficult process.
Their first clinic suspected John had a brain tumor and insisted that he go through a series of brain scans before they would begin treatment.
The couple decided to start over at a different clinic. They paid $25,000 to IntegraMed last January for two cycles of in vitro fertilization at Reproductive Medicine Group in Tampa.
Then COVID hit and shut down the economy.
And then came news of IntegraMed’s bankruptcy.
“The best way I can describe it is a roller coaster,” Krysta Glass said. “Yeah,” her husband interjected, “the Disney Tower of Terror.”
Krysta started up a Facebook page to try to find other fertility patients in the same boat. She called the page “The UnATTAINables.” More than 50 other IntegraMed patients joined up to share their stories.
Crystal Lasnier of Hansville, Wash., admits she “freaked a bit” in July when she heard about IntegraMed’s bankruptcy. Just months before, she and her husband had handed over $40,000 to the company.
“I wanted to create a sibling for my daughter,” said Lasnier, who gave birth to her first child in 2016 with the help of fertility treatment Seattle Reproductive Medicine.
In South Carolina, Jamison and Samantha Cary said they knew nothing of IntegraMed’s fatal plunge until November, six months after its bankruptcy. They had paid $28,000 to IntegraMed.
“We don’t know what we’re supposed to do,” Jamison Cary said in November. “Should we be filing some sort of claim in the bankruptcy? We literally have no idea.”
Fear and loathing in Wilmington
Bankruptcy can be a dry affair. IntegraMed’s was high drama.
Between the nature of IntegraMed’s business and the bad blood between it and several regional clinics it managed, this was a Chapter 7 like few others. It all played out in a bankruptcy court in Wilmington, Del., the state where many companies incorporate to take advantage of business-friendly regulations and practices.
In September, the court-appointed trustee rushed to the judge for an emergency ruling on what to do with 7,600 frozen embryos and sperm that were in a cryogenic freezer in Connecticut. There were fears power could be cut off the building, ruining all that precious genetic material.
“I’ve been practicing in bankruptcy law for over 30 years and this is one of the most challenging cases I’ve ever been involved in,” said Mark Felger, the attorney for the trustee.
The trustee wanted to sell the IntegraMed assets to a new company backed by Amulet Capital, a Connecticut private equity firm. Seven regional fertility practices objected.
These clinics had handed over sweeping management authority of their operations to IntegraMed, putting it in charge of virtually everything other than the medical side. Under the deal favored by the trustee, these management agreements would remain in force with the new owner.
The fertility practices wanted to regain their independence. They pointed out that their exposure to IntegraMed was so enormous, its failure also threatened their survival. And if the clinics also collapsed, that could lead to a long list of disasters including “the interruption of a patients’ last attempt to conceive and to potential damage or loss of a patients’ irreplaceable genetic material stored by the medical practices.”
The clinics went looking for anything that could blow up the straightforward sale of assets envisioned by the trustee. It didn’t take long before they hit pay dirt.
In late June, they filed hundreds of pages of new documents claiming that IntegraMed entered bankruptcy owing “$19.5 million to Attain patients in the form of refunds.”
What’s more, IntegraMed “improperly spent” another $22 million in customer deposits, they claimed, much of it swept from the fertility practices’ own bank accounts.
IntegraMed never disclosed any of this in its own submissions to the court, it never listed a single individual patient as a creditor and never notified any of the individual patients of the bankruptcy. This amounted to giant violation of the patients’ constitutional right to due process, the clinics argued.
Felger, the lawyer for the trustee, backed up the claims by the medical practices.
“We asked them (IntegraMed) why they didn’t disclose it in its schedule of liabilities,” Felger said. “It just seemed inappropriate.”
Validation and happy endings?
For some of the patients, the courtroom allegations against IntegraMed felt like validation.
But they also wondered why they didn’t get an opportunity to participate in the process. It was their money, after all, that IntegraMed allegedly misappropriated.
The regional fertility practices won the day. U.S. Bankruptcy Court Judge Laurie Silverstein allowed the practices to buy themselves back from IntegraMed. A condition of the deal was that the clinics follow through on the promises IntegraMed had made to its patients.
Other IntegraMed assets were purchased by a company called U.S. Fertility. Felger said it, too, has promised to make good on the deals promised to patients.
Many patients are still figuring out what the aftermath will mean for them, and their hopes for a baby.
Crystal Lasnier said the bankruptcy’s resolution is great news for her. The Seattle Reproductive Clinic told her it will honor her agreement with IntegraMed.
The bankruptcy case did nothing for Krysta and John Glass. Their Florida clinic informed them this fall that it will not provide the treatment they paid for, nor the refund.
“We are out the money-back guarantee, we are out the $25,000 we paid Attain and, of course, we may not have a chance at a baby,” Krysta Glass said.
The clinic told the couple that their options were to come up with the additional funds to continue treatment, do nothing and “abandon our embryos,” or move to another clinic.
“To me it feels like everyone had someone to fight for them except the patients,” John Glass said.
As for the Murphys, they were “thrilled” to hear that OHSU will provide the treatment they paid for. Last fall, following questions from The Oregonian/OregonLive, OHSU also changed its tune on the refund.
King, the OHSU administrator overseeing the fertility clinic, said it is “committed” to providing all of the fertility treatment and refunds and anything else its patients were due under their agreements with IntegraMed/Attain.
“We got caught a little blindsided” by the bankruptcy, King admitted. “But we’re going to honor those agreements. Our number-one priority has always been the patients.”