Health Midwest and Kansas Attorney General Phill Kline reached an agreement last week over the fate of proceeds resulting from the not-for-profit system's $1.1 billion sale to HCA, ending a lengthy legal battle that threatened to delay the sale.
The settlement creates a Kansas foundation that will receive 20% of the sale's overall net proceeds, which are expected to total $700 million. The Kansas foundation, which will offer grants for indigent healthcare, will receive $100 million initially. The two sides reached an agreement as a March 31 deadline approached to close the sale.
In a statement, the Health Midwest board said it was pleased with the agreement that will terminate the pending litigation and allow the sale to be completed.
"Everyone involved negotiated in good faith and showed a willingness to compromise," Kline said in a written statement.
The agreement in Kansas marks the end of a legal battle that began last fall shortly after for-profit HCA, Nashville, and not-for-profit Health Midwest struck the $1.1 billion deal (Dec. 16, 2002, p. 6).
Missouri Attorney General Jay Nixon and former Kansas Attorney General Carla Stovall asked courts in their respective states to dissolve Health Midwest and oust the board. The attorneys general wanted new boards to oversee the proceeds of the sale.
In January, Nixon and Health Midwest officials reached a settlement creating a healthcare foundation that will be controlled by a new board, which will be governed by members selected by Nixon, Health Midwest and the community. Nixon's proposal for a joint foundation guaranteed at least 10% of the proceeds to Kansas. But Stovall pressed for a guarantee that 20% of the sale proceeds remain in Kansas.
After the Missouri settlement, Kline, who took office in January, obtained a temporary restraining order prohibiting the transfer of Health Midwest assets from the three Kansas holdings across state lines. In the agreement reached last week, Kline won his legal battle to have 15% to 25% of the net proceeds placed in a Kansas foundation. "It's a big win for us," spokesman Whitney Watson said. "Sixty days ago we had nothing."
Health Midwest also announced last week that five facilities not involved in the sale will be renamed Community Health Group. Thomas Langenberg, executive vice president and chief financial officer at Health Midwest, was named president and chief executive officer of the new organization, which doesn't include acute-care hospitals.