En­force­ment prob­lem

HCA or­dered to pay $162 mil­lion to foun­da­tion

Modern Healthcare - - LATE NEWS - Joe Carl­son

Ajudge in Kansas City slapped HCA with a $162 mil­lion judg­ment last week for vi­o­lat­ing com­mit­ments to fix up dis­tressed hos­pi­tals and pro­vide in­di­gent care. The com­mu­nity foun­da­tion’s three-year le­gal bat­tle to en­force the agree­ment high­lights the dif­fi­cul­ties in such ar­range­ments.

For-profit hospi­tal com­pa­nies and in­sur­ers are of­ten re­quired to form in­de­pen­dent foun­da­tions when they buy out not-for-profit or­ga­ni­za­tions, un­der the rea­son­ing that tax­ad­van­taged com­mu­nity as­sets like hos­pi­tals and health plans ought to con­tinue to ben­e­fit their lo­cal donors.

But in prac­tice, the agree­ments have proven chal­leng­ing to po­lice, said Jill Horwitz, a pro­fes­sor at UCLA School of Law in Los An­ge­les. “They’re tough to en­force be­cause you need to have in­for­ma­tion and at­ten­tion to en­force them,” she said. “You need bod­ies in the (state at­tor­ney gen­eral’s) of­fice that have the time and in­cli­na­tion to en­force.”

The Health Care Foun­da­tion of Greater Kansas City, which was formed as a con­di­tion of the ac­qui­si­tion, was in the some­what un­usual sit­u­a­tion of be­ing a pri­vate en­tity in charge of en­forc­ing the agree­ment. It wound up spend­ing what its CEO Steve Rol­ing called a “size­able” amount of money to fight HCA in court since 2009.

When HCA of­fered to buy the 11 hos­pi­tals owned by Health Mid­west in 2002 for an es­ti­mated $1.25 bil­lion, the com­pany agreed to spend at least $500 mil­lion over the coming decade on char­ity care, and $450 mil­lion on cap­i­tal in­vest­ments to the sys­tem’s ex­ist­ing hos­pi­tals, ac­cord­ing to a le­gal anal­y­sis of the agree­ment ren­dered by Judge John Tor­rence of the 16th Cir­cuit Court of Jack­son County, Mo.

HCA of­fi­cials, in­clud­ing then-Chair­man and CEO Jack Boven­der Jr., tes­ti­fied that the in­vestor-owned hospi­tal com­pany lived up to its agree­ments by build­ing two new hos­pi­tals and show­ing that the hos­pi­tals had pro­vided as much in­di­gent care over­all as Health Mid­west had be­fore the pur­chase— at least $65 mil­lion a year.

Tor­rence dis­agreed, rul­ing in a 141-page de­ci­sion Jan. 24 that HCA of­fi­cials’ tes­ti­mony was not cred­i­ble.

The judge found that HCA had spent at least $162 mil­lion less on cap­i­tal spend­ing on ex­ist­ing hos­pi­tals than it had promised, or­der­ing the com­pany to pay the foun­da­tion that amount of money.

Tor­rence also ruled that it was not clear whether HCA had im­prop­erly in­cluded marked-up re­tail prices and un­col­lectible debt when it com­puted how much free care it had pro­vided, or­der­ing a court-su­per­vised ac­count­ing to ex­am­ine HCA records. Any short­fall could in­crease the dam­ages in the rul­ing.

HCA of­fi­cials have vowed to ap­peal. “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,” a com­pany spokes­woman said in a state­ment.

Su­san Sherry, deputy di­rec­tor with health­care con­sumer ad­vo­cacy group Com­mu­nity Cat­a­lyst in Bos­ton, ap­plauded the Kansas City foun­da­tion for bat­tling the na­tion’s largest for-profit hospi­tal chain in court, which she ac­knowl­edged is a dif­fi­cult task.

“I’m sure it is, but that is ex­actly what they should be do­ing,” Sherry said. “They are clearly ful­fill­ing their mis­sion and their obli­ga­tion. Their job is to stand up for that pub­lic good and for the com­mit­ments made to the pub­lic.”

But Horwitz said the long-term value of such com­mit­ments is not to­tally clear.

Not-for-profit or­ga­ni­za­tions are re­quired by law to adapt to com­mu­ni­ties’ chang­ing needs over time, in­clud­ing clos­ing hos­pi­tals when mar­ket de­mands change.

“Non­prof­its have an obli­ga­tion to ad­vance their char­i­ta­ble mis­sion over time and in re­sponse to chang­ing cir­cum­stances, and that obli­ga­tion can­not be eas­ily re­pro­duced by a con­tract,” she said. The out­come in the Kansas City case “should make peo­ple wary of sign­ing th­ese long-term con­tracts and as­sum­ing that we can de­cide in ad­vance what will be in the best in­ter­est of health­care com­mu­ni­ties 10 years out.”

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