LifePoint still pursuing acquisition after feds say St. Francis owes $21.4M

A federal audit by the U.S. Department of Housing and Urban Development and the Office of the Inspector General has found Columbus, Ga.-based St. Francis Hospital did not comply with federal regulations and a regulatory agreement connected to the financing of its $252 million expansion and campus renovation completed in 2013, according to a Ledger-Enquirer report.

The audit report specifically says the hospital's management failed to put "adequate controls" and "written policies and procedures" into place to make sure the hospital's $210 million mortgage insured by HUD was administered properly under federal regulatory requirements, according to the report

St. Francis also improperly transferred $10.5 million in funds from the HUD-backed mortgage and collateral to its operating account, according to the audit report.

"As a result, $21.4 million in proceeds from the HUD-insured mortgage and HUD's collateralized properties were not disbursed properly and the multifamily insurance portfolio was subjected to increased risk," the audit stated.

The report recommends that St. Francis repay the $21.4 million in improperly disbursed mortgage funds and to put policies and controls in place to ensure the hospital's financial reporting complies with federal regulations and HUD rules. In addition, the report recommends the hospital resolve apparent conflicts of interest related to the hospital's board of trustees and Columbus Bank and Trust that were identified in the audit.

The hospital is already taking steps to address some of the issues outlined in the audit report, according to a St. Francis spokeswoman, Amy Adams.

"Many of the issues identified in this report had already been identified by St. Francis through our own voluntary review of our financial processes and related procedures," Ms. Adams told the Ledger-Enquirer. "Moving forward, we will continue to be focused on ensuring that the recommendations of HUD reviewers are successfully implemented. We have already begun to address many of these recommendations."

The audit report was released at the same time Brentwood, Tenn.-based LifePoint Health is trying to acquire Saint Francis. In a statement released Monday, a LifePoint spokeswoman told the Ledger-Enquirer that the hospital has been transparent on the issues identified in the audit report and that LifePoint is still moving forward with the deal, which is in the due diligence phase.

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