Hundreds of millions of dollars are at stake in a legal dispute set to begin this week in which three of the seven hospitals in the Health Alliance of Greater Cincinnati are trying to exit the health system.
The Health Alliance is seeking to prevent 470-bed Christ Hospital, Cincinnati; 217-bed St. Luke Hospital East, Fort Thomas, Ky.; and 177-bed St. Luke Hospital West, Florence, Ky., from departing. The trial, which has been postponed several times, will climax a year of wrangling that saw mediation efforts fail, the intervention of a former Ohio attorney general and several judicial rulings allowing both sides to claim victories.
The dispute began last year when Christ Hospital notified the Alliance that it wanted out, alleging that the system had breached a merger covenant—triggering a contractual default that would allow it to leave legally. Board members of the 118-year-old Christ Hospital also cited a history of the Alliance’s alleged underinvestment in the hospital, and expressed fears that the system planned to close the facility and relocate it from its urban site.
In March 2006, the Alliance filed a state civil suit in Hamilton County Court of Common Pleas, Cincinnati, to prevent the hospital from leaving. Shortly after Christ Hospital announced its intent, the two St. Luke hospitals also sought to withdraw.
Last week, the court granted a motion filed by the rebel hospitals concerning the Alliance’s ability to bind Christ Hospital and the St. Luke hospitals to debt financing without their boards’ approval. The Alliance had earlier sought to finance construction of a new, $200 million hospital in the Cincinnati suburb of West Chester, obliging its hospitals to satisfy proposed bond debt.
Christ Hospital Chairman Mike Keating said the hospital’s board was pleased by the decision. “The court has reaffirmed the Christ Hospital’s reserved powers under the joint operating agreement,” Keating said. “And (we) once again call on the Health Alliance to revisit its decision to pursue a trial.”
His plea went unheard. Health Alliance spokeswoman Gail Myers said the court’s ruling “became a moot point” when the Alliance chose to finance the construction of its 160-bed West Chester (Ohio) Medical Center with cash, not bond debt. Construction has begun on the hospital, which is located about 20 miles north of Christ Hospital and is slated for a 2009 opening. “This does not in any way preclude the reason for the trial.
“Those hospitals do not have an ability to withdraw from the Alliance,” Myers said. “There has been no event of default. … And we expect that the court will find in our favor.”
Health Alliance President and Chief Executive Officer Kenneth Hanover said what’s at stake is “nothing less than the healthcare delivery system and the safety net for the uninsured in this region, which could affect the economic stability and quality of life in greater Cincinnati.” But Christ Hospital’s Keating said at issue is a hospital board’s right to decide what’s best for the hospital and the community it serves. “Withdrawing from the Health Alliance allows the Christ Hospital to remain in its urban location, to invest in state-of-the-art healthcare services and to provide exceptional patient care,” Keating said in a news release.
Robert Baudino, a Des Moines, Iowa, healthcare attorney who has worked both to create and dissolve hospital mergers, said the key to winning at trial will be in the interpretation of the agreement the hospitals signed to form the Alliance. Baudino said usually there are specific provisions within the agreement allowing withdrawal.
