A public hospital in rural Kentucky has been sued by local county officials, who claim the facility improperly diverted $1.3 million in public funds to a not-for-profit foundation created three years ago.
County officials claim the foundation is private; hospital officials maintain it is public.
Calloway County Attorney Randy Hutchens filed suit last week against 130-bed Murray-Calloway County Hospital in Murray, asking the court to force the foundation to return those funds to the hospital, the largest publicly operated acute-care facility in western Kentucky. Funds in the Community Healthcare Foundation now total more than $2.1 million.
Hutchens said he reluctantly filed suit after determining that "the transfer of funds from a public hospital to a private foundation is illegal. A public hospital or local government-or any public entity-can't give away public assets."
Officials of the hospital, which has not received tax dollars from the city or county in more than a decade, said the money was properly transferred. Without support from the foundation, which serves as a fund-raising arm, the hospital might have to resurrect a local property tax, they said.
"Our legal advice is that what we've done is legal and proper," said Isaac Coe, the hospital's president.
The foundation was formed in July 1998 to support such projects as health programs at local schools and the Angels Community Clinic, which provides medical services to the working poor.
But the foundation also has been harshly criticized about some expenses-including $116,000 to buy and renovate a home for its new offices and $32,000 in fees for Hillary Lyons, a national consulting firm specializing in hospital foundations.
Hutchens claimed that the diversion of assets opens the door for hospital officials to eventually transfer the public hospital to private ownership, a contention Coe vigorously denied.