A Tennessee court has ruled that a former CEO of CHS subsidiary Lutheran Health Network disclosed the Fort Wayne, Ind., hospital system's confidential information, but he can still work with competitor IU Health to create a new primary-care practice in the area.
Judge Joseph Woodruff of the Circuit Court of Williamson County, Tenn., said Lutheran Health Network will likely prevail in their suit accusing former CEO Brian Bauer of sharing information with third parties, and he cannot create a competing healthcare network with anyone who received that information.
But that doesn't include IU Health. Bauer admitted he shared confidential and proprietary information with a venture capital firm and others.
The judge also prevented Bauer from soliciting Lutheran's employees to work for its competitor IU Health and ordered him to recover the private information he gave out. However, the judge did not grant Lutheran's request that Bauer be blocked from providing consulting services to IU Health.
The temporary injunction is part of a lawsuit Franklin, Tenn.-based CHS and Lutheran filed in November against Bauer for allegedly breaching his contract by disparaging the hospital system, sharing confidential information to harm the system, and ultimately luring IU Health to the Fort Wayne area to compete against Lutheran.
"The court's rulings directly contradict Bauer's repeated and erroneous claims that the litigation against him is 'baseless' and 'without merit,'?" a CHS spokeswoman said in a statement. "The court rulings not only demonstrate that the litigation has merit, they also ensure that the litigation will proceed and prohibit Bauer from continuing to use Lutheran's confidential information for his personal gain."
Bauer was fired as Lutheran's CEO in June 2017 after a failed bid to find a buyer for CHS' eight Fort Wayne hospitals. A group of physicians claimed that CHS neglected Lutheran's capital and staffing needs for years and had lost the trust of physicians. They offered to buy the Fort Wayne hospitals for $2.4 billion, but CHS rejected the offer as inadequate.
In October, IU Health said that Bauer was working as an independent contractor with the system to help build out a new primary-care practice in Fort Wayne. CHS CEO Wayne Smith shrugged off the potential competition at the time, but a month later, CHS sued claiming Bauer was orchestrating a smear campaign against the hospital system to drive Lutheran from the Fort Wayne market.
"CHS' main request was for the court to prevent me from working with IU Health. I'm tremendously gratified the court has rejected that request," Bauer said in a statement Tuesday. "I'm excited to move forward with IU Health expanding access to high quality healthcare in Fort Wayne."
While Bauer testified that he did not share Lutheran's private information with IU Health, he did admit to sharing it with a venture capital private equity investor called New Mountain Capital and others to try to find a buyer for a majority stake in Lutheran Health Network, according to court documents.
Judge Woodruff ruled that Lutheran will likely succeed on the merits of the lawsuit and proved it would suffer harm from Bauer's disclosure of private information.
An edited version of this story can also be found in Modern Healthcare's March 5 print edition.