HCA inks $188M settlement in breach of contract case

Nashville, Tenn.-based Hospital Corporation of America has entered into a $188 million settlement with the Health Care Foundation of Greater Kansas City to resolve breach of contract allegations. 

HCA acquired Health Midwest, a 12-hospital system based in Kansas City, Mo., in 2003. As part of the deal, HCA agreed to spend at least $450 million in capital improvements over the first five years it owned the hospitals.

The Health Care Foundation of Greater Kansas City, which was formed with proceeds from the HCA-Health Midwest transaction, sued HCA in 2009, claiming HCA had reneged on its commitments regarding the capital improvements.

In December 2015, HCA was ordered to pay nearly $434 million to the Health Care Foundation of Greater Kansas City for allegedly failing to fulfill pledges it made when it bought Health Midwest's hospitals.

HCA appealed the judge's order in January 2016. In its appeal, HCA argued it fulfilled its agreement to make $450 million in capital improvements by building new hospitals in Independence, Mo., and Lee's Summit, Mo.

In January, a three-judge panel of the Missouri Court of Appeals reversed part of the lower court's ruling, reducing the judgment against HCA from $434 million to $188 million. The court disagreed with the healthcare foundation's argument that the capital expenditure agreement applied only to improvements on existing Health Midwest facilities.

After the appellate court reduced the judgment, the parties ended the litigation by settling the case for $188 million. The Health Care Foundation of Greater Kansas City said it will receive about $160 million from the settlement after legal fees are paid.

"We are pleased to have reached this mutual agreement that will allow us to close these proceedings and continue our work to eliminate barriers and promote quality health for the uninsured and underserved," said Wayne Powell, chairman of the Health Care Foundation of Greater Kansas City board of directors.

On an earnings call Tuesday, HCA Chairman and CEO R. Milton Johnson said, "This settlement of $188 million brings a final resolution to this dispute and allows us to continue our focus on caring for the Kansas City community." He said that in the 14 years since HCA acquired Health Midwest, HCA has spent more than $1 billion to expand and upgrade facilities and add new services in the market.

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