Dive Brief:
- Community Health Systems, based in Franklin, Tenn. is in the process of suing St. Francis Hospital of Columbus, Ga., over the alleged concealment of a federal investigation that ultimately caused their negotiations to unravel.
- CHS argues that St. Francis misrepresented its legal and regulatory issues until confronted about them, and then withdrew from the pending deal.
- The lawsuit seeks to recover CHS' $5 million good-faith initial deposit, which the hospital has not returned, as well as negotiation expenses, legal fees and punitive damages.
Dive Insight:
The negotiations appear to have been rife with issues from the beginning. While CHS and St. Francis were in initial talks earlier this year, it came out that St. Francis was already in exclusive discussions for a deal with Piedmont Healthcare based in Atlanta, Ga., which fell through before a deal resumed with CHS.
CHS now argues that in both failed acquisitions, St. Francis failed to disclose that it was under investigation by the U.S. Department of Housing and Urban Development for possible violation of regulatory requirements, which could impact the hospital's Medicare status.
CHS also alleges that St. Francis violated exclusivity and confidentiality clauses by continuing to negotiate with other buyers, even after signing an agreement with CHS.
St. Francis has since made a new deal to be acquired by LifePoint Health, based in Brentwood, Tenn.