Henry Ford Health revealed last week that its insurance arm owes $12.7 million to a subsidiary's CEO as part of a proposed stock purchase.
In its 2017 year-end financial release on April 12, Detroit-based Henry Ford revealed that its insurance arm, Grand Rapids, Mich.-based Health Alliance Plan of Michigan, was involved in a lawsuit with ASR Health Benefits CEO Todd Stacy over the value of his one-third ownership in ASR, a third-party administrator. HAP, which owns a majority stake in ASR, has already transferred $15 million to Stacy as part of the dispute.
But Stacy alleged his stock was valued at $71.2 million under an algorithm HAP and ASR agreed to when the insurer agreed to buy a majority stake in ASR in 2011. He sued HAP in October 2016 for $56.2 million plus damages and alleged HAP tried to coerce him to accept tens of millions of dollars less than his ASR shares were worth.
Stacy claimed HAP undertook a "systemic campaign" to use the threat of non-payment to coerce Stacy into accepting less money, which allegedly included making false statements regarding ASR's finances in an attempt to artificially reduce the amount HAP owed.
Attorneys on both sides did not return requests seeking comment.
In a counterclaim filed in March 2017, Henry Ford and HAP said that Stacy's ASR stock was worth $20 million to $25 million, and said payment significantly above fair market value would not only conflict with the terms of the agreement, but would violate state and federal laws, including a Michigan law that prohibits not-for-profit organizations like HAP from using assets for noncharitable purposes. ASR and HAP are seeking damages and attorneys' fees.
The parties agreed on a mediator Monday, according to documents filed in the U.S. District Court for the Western District of Michigan, and must complete mediation by a June 15 court-appointed deadline.
Henry Ford's 2017 year-end financial release reported its profit had dropped to about $204 million from about $276 million in 2016. Patient service revenue increased 11% year-over-year, while total revenue increased 4.8% to $273.7 million. Expenses increased 4% to $222.3 million.