Lawsuit says Colo. AG wrong to approve hospital sale

Jessica M. Karmasek Nov. 18, 2011, 2:30pm


DENVER (Legal Newsline) - Opponents of a nearly $1.5 billion hospital transaction say Colorado Attorney General John Suthers was wrong to approve the deal.

Plaintiffs Richard L. Anderson, Stephanie Allen, Dr. James N. Dreisbach, Nicholas G. Muller, Dr. Ray Blum, Dr. K. Mason Howard, Dr. Susan E. Ljunhag, Dr. Richard Schaler and Dr. Richard Parker filed the lawsuit in Denver District Court Monday.

According to their 25-page complaint, the plaintiffs served as directors of HealthONE or the Colorado Health Foundation, were involved in the creation and governance of the joint venture or have had "extensive involvement" with the HealthOne hospital system, including being on its medical staff.

The plaintiffs are seeking an order from the court directing the Attorney General's Office to withdraw and reconsider its Oct. 13 decision to approve the transaction and "examine the Foundation/HCA Transaction anew."

Last month, Suthers signed off on HCA Holdings Inc.'s proposed acquisition of the foundation's interest in the HCA-HealthONE hospital system.

Suthers said he determined that the transaction is "in the public interest" and that the $1.45 billion sale price is a fair market price.

The attorney general noted his decision was dependent on a series of conditions and modifications to the initially proposed transaction, to which the parties have already agreed. They include:

- A guarantee that none of the seven acute-care hospitals will close in the next five years;

- The board of community trustees will continue for an additional five years beyond the 10 years laid out in the original proposed transaction;

- The indigent care policy and the community benefit program will continue for an additional five years beyond the 10 years laid out in the original proposed transaction;

- The $12 million initially earmarked for the community benefit program will be compounded annually at the rate of increase in the Medicare reimbursement rate for 10 years and would not decrease even if the Medicare reimbursement rate does; and

- Suther's office will mediate any disputes that arise concerning the non-compete agreement prior to the filing of any litigation.

"These requirements will not only ensure that those that rely on the HealthONE hospital system will continue to have access to quality health care, but they also will leave intact the programs that have made these hospitals an invaluable asset for the community," Suthers said at the time.

"This transaction is in the public interest. I am confident that the hospital system as well as the Colorado Health Foundation will continue to be viable and highly beneficial community assets."

His decision followed a series of public hearings at the Rose Medical Center and Sky Ridge Medical Center campuses in September.

But those opposed to the deal argue that by approving the transaction, Suthers vested HCA with "complete control and ownership" of seven of the "most respected and venerable hospitals" in the Denver area.

"All future decisions concerning the Joint Venture and its hospitals, including such critical matters as whether to sell the hospitals or to limit the range of medical care historically furnished by the hospitals, will be made by HCA and by HCA alone," the plaintiffs wrote.

"The Foundation which, since the formation of the Joint Venture in 1995, had been vested with a level of control over these and other critical matters equivalent to the level of control vested in HCA, no longer will have any control."

That means the future of the joint venture and its hospitals will be dictated by HCA's decisions and what best serves the interests of its stockholders, they argue.

"For these reasons, the effectuation of the Foundation/HCA Transaction means that there no longer will be any entity -- such as the Foundation -- whose mission entails speaking up for and representing the interests of Colorado's citizenry which may be threatened by, or differ from, the interests of HCA's stockholders," the plaintiffs wrote.

From Legal Newsline: Reach Jessica Karmasek by email at

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