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Missouri Judge orders HCA to pay foundation $162 million

by Hoyer Law Group, PLLC | Jan 25, 2013 | Firm News

A Missouri state judge has ordered HCA to pay a Kansas City charitable foundation $162 million and undergo extensive auditing after finding the for-profit hospital operator broke key agreements regarding charity care and capital expenditures in its billion-dollar purchase of hospitals from Health Midwest in 2002.

In a 141-page opinion (PDF), Judge John Torrence of the Circuit Court of Jackson County ruled Thursday that HCA, the nation’s largest investor-owned hospital company, did not spend as much money improving Health Midwest’s existing facilities as it said it would—a finding that led to the financial award in the case.

The judge also ruled that HCA could not back up claims that it had provided at least as much charity care to the community as the Health Midwest’s not-for-profit hospitals had provided before the sale, which HCA pegged at $65 million a year. Torrence ordered the company to undergo court-ordered accounting to determine how much it had spent on charity care.

Karen Cox, a registered nurse and chairwoman of the Health Care Foundation of Greater Kansas City, which sued HCA, praised the ruling. “As a voice for the uninsured and underserved, the HCF Board of Directors felt it had the fiduciary responsibility to make sure that this population had been afforded the services promised to them through the sale of Health Midwest,” she said in a statement on the group’s website.

HCA defended its actions and vowed to appeal the decision.

“Rather than simply put money into the repair of old facilities, we built two new hospitals, spending hundreds of millions of dollars to ensure this community has high quality care,” the company said in a written statement (PDF). “We believe we have complied with our agreement, exceeded our promises, and we continue to spend millions for the benefit of a community we love.”

Health Midwest had operated 11 not-for-profit hospitals in Missouri and Kansas before the sale.

In 2002, the acquisition of Health Midwest’s hospitals was the largest transfer of not-for-profit healthcare assets to an investor-owned company in U.S. history. The deal was valued between $1.25 billion and $1.5 billion, though the exact value is still unclear because those figures included capital expenses and charity-care commitments—which will now be the subject of court-monitored auditing.

The foundation was established as a part of the transaction in 2002, to monitor the promises in the deal and distribute grants. Since 2005, the foundation has awarded more than $160 million in grants.

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