HCA to pay $162M for broken promises in merger deal

The nation's largest for-profit hospital chain, Hospital Corp. of America, will have to pay a nonprofit foundation $162 million and undergo audits of charitable care levels after breaking agreements to purchase hospitals in the Kansas City area.

A Missouri judge yesterday ruled in favor of Health Care Foundation (HCF) of Greater Kansas City--one of two foundations set up after the Tennessee-based for-profit health system bought Health Midwest's 11 nonprofit hospitals in 2002. The acquisition was the largest transfer of nonprofit hospital assets to a for-profit entity in the United States, according to The Kansas City Star.

Because Health West's hospitals were nonprofits, the sales' net proceeds went to creating HCF, as well as Reach Healthcare Foundation. The Reach foundation, however, did not participate in HCF's lawsuit and will not receive any of the award, The Kansas City Star reported.

When HCA bought Health Midwest, it agreed to $450 million in capital improvements over five years, The New York Times reported. It also agreed to maintain the levels of care for poor patients for 10 years.

In 2009, HCF filed suit, saying HCA had failed to make those repairs and didn't deliver on charitable care levels.

According to Judge John Torrence's decision, "The annual reports include multiple instances of double counting, where the same alleged capital expenditures and/or commitments were erroneously recorded twice."

HCA said it met its obligation to spend money on the hospital facilities; it built two new hospitals--Centerpoint and Lee's Summit medical centers--instead of making the repairs.

The judge awarded HCF an immediate $161 million, plus attorneys' fees, according to a HCF statement.

Torrence also ruled that a court-appointed accountant will determine whether HCA actually provided the level of charitable care that the health system said it would.

HCA told the NYT the case is "rare" and that it maintains positive relationships with the community. HCA says it plans to appeal.

HCA has been in the public eye, as of late. Last year, the health system revealed it was under investigation for inappropriately billing Medicare for unnecessary cardiology procedures. HCA also settled kickback allegations for $16.5 million.

For more information:
- read the Kansas City Star article
- see the NYT article
- here's the Health Care Foundation article

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