After further review, San Diego-based Sharp HealthCare has terminated its agreement to purchase supplies and "lease" five employees from Columbia/HCA Healthcare Corp. just days after the California attorney general's office voiced concern over the deal.
After the arrangement was publicly disclosed by a San Diego newspaper, executives of the two systems said the medical supply and employment deal predated the state's stand-still order against the proposed joint venture between Sharp and Columbia and was perfectly legal (Jan. 27, p. 4).
After further consideration, the systems said they decided to scrap the deal to avoid the appearance of impropriety.
"We were concerned about the image the arrangement created and did not want to create a perception that it was something that it was not," said Sharp spokeswoman Stephanie Casenza.
The flip-flop is the latest turn in the ongoing saga of the proposed joint venture. Last November, the systems agreed to put the deal on hold pending an investigation by the state attorney general's office. The office feared Sharp's assets had been undervalued. The state said that could deprive the community of charitable assets after the systems created a foundation with the proceeds of the joint venture. Columbia wanted to buy half Sharp's assets for more than $200 million.
The attorney general's office has since determined Sharp will have to reopen the bidding process.
In a Jan. 27 letter to Sharp, deputy attorney general Jim Schwartz questioned the employee leasing arrangement the two systems had prior to signing a final joint venture deal. "We seriously question the prudence and propriety of commingling employees . . . before a deal has been closed," Schwartz wrote.
Schwartz also suggested that Sharp and Columbia intended to enter their joint venture before obtaining legal approval, in possible violation of the stand-still agreement. He voiced concern that if Sharp were to attempt to find another partner, potential suitors might be concerned that Columbia employees had had access to its business records.
Neither Schwartz nor Columbia officials were available for comment.
Four of the five leased employees returned to Columbia. Janice Noble, who had been serving as chief operating officer of 99-bed Sharp HealthCare Murietta, chose to stay.
Sharp has maintained it didn't violate the stand-still order, saying leasing employees was a convenient way to staff critical positions in anticipation of a deal closing.
Casenza has noted that the Columbia employees were required to sign confidentiality agreements before coming to work at Sharp facilities.