Vanguard deal for Detroit Medical Center complete

After about nine months of courtship, Nashville-based Vanguard Health Systems signed an agreement Dec. 30 to takeover Detroit Medical Center, just before a critical year-end deadline when certain state tax incentives were set to expire.

Under the $1.5 billion deal, Vanguard will acquire all of DMC's assets and $700 million in liabilities. Vanguard also agreed to pay for $850 million in capital improvements and specific capital projects over the next five years, the Detroit Free Press reports. DMC becomes a subsidiary of the Vanguard system and will make up 40 percent of the company's portfolio.

The takeover will transform the struggling DMC, an eight-hospital system, into a for-profit entity. Vanguard has pledged to keep all eight DMC facilities open for at least a decade and maintain care for uninsured and poor patients.

"The hard part's done now," said Vanguard Vice Chairman Keith Pitts, "and now the fun part begins."

In related news, a conflict that arose in the fall over Vanguard's potential liability for DMC's past Medicare and Medicaid billings prevented the deal from closing quicker. After discovering irregularities in billing and leases with unaffiliated physicians as it prepared to be sold to Vanguard, DMC told the government about the violations. Most involved favorable lease deals and independent contractor relationships that were not put in writing or did not reflect fair market value.

Although federal law restricts certain financial deals between hospitals and doctors who refer patients, DMC had given doctors tickets to sporting events, entertainment and charity dinners between 2004 and 2010, according to the Associated Press.

DMC agreed to pay the U.S. $30 million for violating the False Claims Act, the Anti-Kickback Statute and the Stark Statute by engaging in improper financial relationships with referring physicians, according to a Justice Department press release dated Dec. 30.

DMC chief executive Mike Duggan told the AP that the settlement had to be completed the last week of December, or the sale "would have been dead."

To learn more:
- read the DMC/Vanguard press release
- read the DOJ press release
- here's the Detroit Free Press article
- read the Associated Press story
- here's the Wall Street Journal piece

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