The largest physician group in Wichita, Kan., sued Columbia/HCA Healthcare Corp. last week, alleging that Columbia stole 40% of its family-practice doctors after engaging the group in merger talks it never intended to complete.
The lawsuit by Wichita Clinic says Columbia Wesley Medical Center, the largest hospital in the Columbia system, interfered with contracts, misappropriated trade secrets, breached confidentiality, committed fraud and tried to monopolize the local market.
Under the monopoly count, Wichita Clinic is asking for triple damages under Section 2 of the Sherman Act. The suit doesn't specify a dollar amount for those damages.
Columbia couldn't be reached for comment on the suit.
The 42-page lawsuit, filed in U.S. District Court in Wichita, describes a predatory corporate culture that intentionally set out to cause harm to its putative business partner.
"Columbia's actions in Wichita are believed to be indicative of a nationwide strategy to reduce or eliminate competition at their gain," said Steven J. Perkins, chief executive officer of the clinic, in a written statement.
In 1994, Columbia acquired 460-bed Wesley Medical Center in its merger with Hospital Corporation of America. For years, the lawsuit states, "Wesley had charged excessively high prices and had reaped excessively high profits for its healthcare services."
According to HCIA, a Baltimore-based healthcare information company, Wesley's 1995 total profit margin was 15.3% on $271 million in net patient revenues. In 1994, the margin was 13.9%, and in 1993, 7.1%.
Meanwhile, the local hospital market consolidated into two major players when two Roman Catholic institutions merged and formed Via Christi Health System.
At that time, Wichita Clinic had 140 physicians in nine locations and was the leading primary-care practice in town. Columbia wanted to partner with it and create a joint venture HMO.
After obtaining all the clinic's confidential information, including compensation plans, Columbia unilaterally added 12 items to the letter of understanding it had reached with Wichita Clinic, the suit says.
Columbia also reneged on its promise to pay $30 million to $36 million to the clinic doctors for half an interest in their practice, the suit contends. At the last minute, Columbia told the doctors that its evaluation came in much lower than predicted and that it had in mind an outright acquisition rather than a merger, the suit says.
Subsequently, the suit alleges, Columbia recruited Wichita Clinic's primary-care physicians by offering them "extraordinary" compensation and by paying off their noncompete clauses in the form of a "signing bonus."
During this same period, Columbia was negotiating a joint venture with another large physician practice in Kansas, Cotton-O'Neil Clinic in Topeka, the suit says. There, too, Columbia reduced the amount it was willing to pay for the practice after due diligence was conducted, according to sources close to the transaction. Cotton-O'Neil withdrew from the deal once it became clear that Columbia would not honor its original terms.