A state lawsuit against a not-for-profit hospital in Boca Raton, Fla., is setting a precedent that could lead to closer examinations of sales of hospital charitable assets-no matter who the buyer is.
Unlike recent litigation and investigations by states against acquisitions made by for-profit chains, the buyers this time are fellow not-for-profits. If other state attorneys general mimic the case, a new wave of legal scrutiny could crash over the hospital merger and acquisition boom.
The deal in question is the proposed $190 million purchase of 331-bed Boca Raton Community Hospital by a group of not-for-profit hospitals.
The buyers, which cut their deal with Boca Raton Community in November, are Allegany Health System, Tampa, Fla.; Intracoastal Health Systems, West Palm Beach, Fla.; and Eastern Mercy Health System, Radnor, Pa.
In a suit filed last week in Palm Beach County (Fla.) Circuit Court, Florida Attorney General Bob Butterworth said he wants the proposed sale to be "consistent with the wishes" of the facility's donors. The hospital and its board of trustees are the named defendants in the case.
"It may well be that the trustees are on a path that would both foster the survival of a not-for-profit community hospital and be consistent with the intentions of the many Floridians who have provided gifts and bequests through the decades, but the board has not yet made public a sufficient explanation as to how this is so," he said.
After attempting to make its own inquiries, Butterworth is leaving it up to the courts to decide whether the trustees carried out their fiduciary duties.
The suit comes amid an outcry from some community members concerned about the hospital's assets as well as the fairness of the deal, which includes the $190 million selling price plus retirement of undisclosed debt. Butterworth said he wants the trustees to explain how they're meeting their "fiduciary responsibilities to the (hospital's) numerous beneficiaries."
Hospital executives don't believe the suit is necessary, saying they have provided documents to the attorney general's office and will continue to do so.
"We really don't think it's necessary to involve the judicial system," said Atlee Wampler, a Miami attorney representing the hospital. "We still do plan to provide all of the information to the attorney general."
The proposed sale of the 34-year-old facility to the group of not-for-profit hospitals will end Boca Raton Community's existing governance structure.
One of the 11 board trustees, Keith Wold, M.D., resigned last month, saying he didn't agree with the decision to sell the hospital. He said the hospital should remain independent.
The case may reveal how much the hospital trustees knew about the deal, which will be of interest to boards of other not-for-profit hospitals across the country.
C.C. Dykas, assistant deputy attorney general, said that minutes of recent hospital board meetings show several trustees were absent during meetings discussing the hospital sale and few questions were asked by board members about the deal.
The decision to go with the not-for-profit systems ruled out a deal with investor-owned chains Columbia/HCA Healthcare Corp. and Tenet Healthcare Corp., which both expressed interest in acquiring the hospital. Another not-for-profit facility, Bethesda Memorial Hospital in Boynton Beach, Fla., was interested in a merger.
Calling the lawsuit a "friendly one," the attorney general tried to downplay its significance, citing other Florida cases involving sales of not-for-profit hospitals like Anclote Manor Hospital of Tarpon Springs, Fla., and Punta Gorda (Fla.) Community Hospital. But MODERN HEALTHCARE*records indicate for-profit companies were involved in both of those deals, unlike the new lawsuit filed by the state.
"Most of the reported cases have involved self-dealing and real breaches of fiduciary responsibility and things that could be prosecuted criminally," Wampler said. "This case isn't like those at all."