The fight over physician ownership has taken an interesting turn in Kansas, where the states high court ruled on a 3-year-old case that pitted physician investors against each other.
Legal disputes regarding physician investment are not uncommon between full-service, acute-care facilities and competing specialty hospitals, or between community hospitals and the physicians they employ. The latter is happening now in Arkansas, where the five-hospital Baptist Health system in Little Rock is involved in a lawsuit against physicians over the systems economic conflict-of-interest policy. To maintain their privileges at Baptist, the physicians would have to divest their interest in the competing Arkansas Heart Hospital, according to court documents from Baptists legal team. Both sides have submitted their findings of fact and conclusions of law and have until June 6 to offer responses.
But things played out differently earlier this month in Wichita, Kan., where the state Supreme Court ruled in a case that involved physicians who had formed an alliance in 1999. On May 16, the court ruled in favor of the physician owners of Kansas Heart Hospital in a lawsuit against some of the Wichita hospitals former physician owners for violating corporate bylaws after they invested in a competing healthcare facility. The decision allowed the owners to redeem the stock of the 13 former investors.
The lawsuit developed from a conflict among shareholders of two Kansas corporations, some of whom held shares in both organizations: Cardiac Health of Wichita and Cardiac Associates of Wichita, which together own a controlling interest in the 54-bed Kansas Heart Hospital, according to the court decision. In 2005, board members of Cardiac Health of Wichita learned that 14 physicianswho were shareholders in both groupsinvested in the Kansas Medical Center, a hospital that was to be built in Andover. This action violated a corporate bylaw dating back to 2000, which prohibited any shareholder from owning shares in a competing health facility.
The court opinion really affirms the need for physician investors to act responsibly and according to the bylaws of their corporation, said Gregory Duick, a founder of the Kansas Heart Hospital and chairman of its management committee. When they violate these bylaws, there are significant adverse financial consequences.
The courts decision cites minutes from Cardiac Health of Wichitas annual shareholder meeting in February 2000 in which physician investor Badr Idbeis said it was in the best interest of shareholders to enact a restrictive covenant that would prohibit investment elsewhere. But Duick said that it was Idbeis who led 12 other physicians to develop the competing facility in what Duick called a clandestine fashion. (A spokesman for Kansas Heart Hospital said that one of the physicians involved settled and is still an owner.) Idbeis was one of the founders of the Kansas Heart Hospital in 1999, Duick said. Now Idbeis serves as chief executive officer and chairman of the board at 40-bed Kansas Medical Center. He did not return phone calls to be interviewed for this story.
As the lawsuit and appeal process continued, it did not deter Wichita-based Via Christi Health System from joining forces with the Kansas Heart Hospital in May 2007. At that time, five-hospital Via Christi purchased a 49% stake in the facility, while practicing physician investors, retired physician investors and community business owners held the remaining 51%.
Initially we were an independent specialty hospital, said the Kansas Heart Hospitals Duick. We are now a partner with a large community, tertiary-care center and its working very well.