Michigan Capital Healthcare said last week that it's pursuing two strategies to salvage its joint venture deal with Columbia/HCA Healthcare Corp., including negotiating a settlement with the Michigan attorney general's office.
The strategies follow a decision by a Michigan trial court judge that such joint ventures are illegal under Michigan law (Sept. 9, p. 2).
Meanwhile, healthcare experts from across the country are weighing in with their thoughts on what the judge's decision means for Columbia, Michigan Capital and affiliations between other for-profit and not-for-profit hospitals.
In a Sept. 5 ruling, Ingham County Circuit Court Judge James Giddings voided the proposed joint venture between Michigan Capital, the parent corporation of Michigan Capital Medical Center, a two-campus, 369-bed not-for-profit hospital, and Columbia, the nation's largest for-profit hospital chain, based in Nashville, Tenn.
Giddings said Michigan law bars the transfer of charitable assets to a for-profit joint venture. But, he said a divestiture of a not-for-profit organization's charitable assets is allowable under state law.
Therein lies the plum for Columbia, according to Peter Young, a healthcare consultant based in Cape Coral, Fla. The ruling essentially gives Columbia the green light to pursue hospital purchases in Michigan rather than forcing the company into joint ventures with not-for-profit hospitals that are reluctant to give up total control to the for-profit giant, he said.
"We do not view the judicial decision as any significant barrier to Columbia entry into Michigan," Young said. "On the contrary, the process has been defined and we expect Columbia to move forward with additional asset purchases and network development."
Columbia executives have declined to return phone calls regarding the court ruling and its impact on the company's plans in Michigan.
Others, though, see the ruling as a shot in the arm for politically minded attorneys general in other states who are looking for ways to control the transfer of traditionally charitable assets to for-profit companies.
"The ruling will highlight the issue for other attorneys general, other hospital boards and other hospital attorneys," said T.J. Sullivan, a former top official with the Internal Revenue Service who is now a private attorney with Gardner, Carton & Douglas in Washington.
Attorneys general in several states, including California, Massachusetts, Nebraska and Ohio, have been active in monitoring the growing number of not-for-profit sellouts to for-profit companies. It was the Michigan attorney general's office that challenged the Lansing joint venture after it was announced in June.
As for Michigan Capital, its board voted last week to appeal Giddings' ruling to the Michigan Court of Appeals in Lansing. Giddings' granted Columbia's motion to be dismissed as a defendant.
Michigan Capital also said it wants to continue discussions with the state attorney general's office to determine if they can agree on a "legally acceptable partnership" between it and Columbia.
Chris DeWitt, a spokesman for Michigan Attorney General Frank Kelley, said the office is open to discussions with Michigan Capital regarding other options between it and Columbia.
"But if they come to us with the same old story, it's still illegal," DeWitt said.