Appeals court knocks millions off amount owed by HCA to KC health foundation

When HCA Inc. bought the Health Midwest hospital chain in 2003, the sale agreement called for the hospital company to spend about $450 million in addition to its $1.13 billion purchase price on capital improvements.

In 2009, the Health Care Foundation of Greater Kansas City sued HCA, charging that it had failed to meet the agreement. The lawsuit contended that HCA wrongly counted money it had spent to build two new hospitals in Lee’s Summit and Independence as part of the capital improvement commitment.

On Tuesday, a Missouri appellate court sided with HCA and said the new construction counted as part of the capital expenditure promise.

Hundreds of millions of dollars are affected by the decision, which both parties said they are weighing to consider possible appeals.

The latest action in the case came in an opinion from the Missouri Court of Appeals, Western District, which heard arguments in December.

The three-judge panel disagreed with the foundation’s contention that the capital expenditure agreement was meant for improvements to existing Health Midwest facilities, including Research, Menorah and Overland Park hospitals.

The lawsuit stemmed from agreements made in connection with the sale of the nonprofit Health Midwest hospitals to the for-profit HCA company. The sale established two Kansas City-area health care foundations that were created to support “safety net” health care and other health care services by awarding annual grants to providers.

The foundation that brought the suit previously had been awarded more than $433 million from HCA by a trial court, but the appellate decision reduced the amount HCA owes the foundation to about $205 million.

The opinion upheld part of the trial court ruling that had awarded millions of dollars to the foundation for HCA’s failure to make and report its capital improvement spending in a timely way, as required by the sale agreement.

The appellate court said the foundation is due a shortfall in HCA spending of nearly $166 million plus accrued interest and attorneys’ fees, to equal about $205 million.

HCA, through a hospital spokeswoman, said, “We are pleased the Missouri Court of Appeals held ‘it is uncontested’ that we ‘spent in excess of $450 million during the five-year term following closing.…,’ living up to our agreement to do so. Regarding the remainder of the ruling, we are considering our options” to appeal a part of the opinion that favored the foundation.

Foundation CEO Bridget McCandless said the foundation is processing the ruling.

“Once litigation concludes, HCF will continue a deliberate and thoughtful review of our region’s health needs and engage community partners to discuss how this ruling can be leveraged to continue to positively impact our service area,” McCandless said in a news release.

Because of the ongoing litigation, none of the money has changed hands.

This story was originally published January 17, 2017 at 4:22 PM with the headline "Appeals court knocks millions off amount owed by HCA to KC health foundation."