Community Health Systems is suing St. Francis Hospital in Columbus, Ga., for allegedly concealing a federal investigation while the organizations negotiated a deal that ultimately fell apart.
CHS claims in the suit filed Aug. 7 that St. Francis misrepresented material facts about its legal and regulatory problems, then backed out of the deal when confronted about the issues. CHS seeks to recover its $5 million good-faith initial deposit, negotiation expenses, legal fees and punitive damages.
The lawsuit comes after St. Francis signed a new letter of intent last month to be acquired by LifePoint Health.
While CHS and St. Francis were in initial talks this year, St. Francis reportedly entered discussions with Piedmont Healthcare. When that deal fell through months later, St. Francis Chairman Richard Bradley said it was because Piedmont didn't want to take on the hospital's debt.
But the CHS complaint alleges Piedmont ended the negotiations because it discovered St. Francis was under investigation by the Department of Housing and Urban Development for possibly violating regulatory requirements. CHS says the hospital repeatedly lied about its legal problems, failing to disclose the HUD audit and Medicare regulatory problems until the two parties were deep into due diligence and the HUD report was about to be made public.