Lawsuit seeks to halt Deaconess’ planned hospital acquisition

Photo: Pichsakul Prumrungsee EyeEm/Getty Images

A group called Save Jennie Stuart has filed a lawsuit seeking to stop Deaconess Health’s planned acquisition of Jennie Stuart Medical Center in Hopkinsville, Kentucky.

According to the plaintiffs, the decision to file suit against the hospital’s board of directors was made after an investigation into the value of Jennie Stuart Medical Center, as well as a consultation with financial experts. 

This investigation, the plaintiffs said, showed that “the fair market value of Jennie Stuart is substantial and the Jennie Stuart Board has breached its fiduciary duties to the hospital by agreeing to essentially transfer the hospital and all of its assets to Deaconess without sufficient consideration coming back to the community.”

They’re requesting a restraining order, preliminary injunction and permanent injunction to stop the hospital from following through with the transaction.

WHAT’S THE IMPACT

Based on their investigation, the plaintiffs estimate Jennie Stuart Medical Center has a book value of more than $157 million. The complaint is critical of the hospital’s four-person committee that is handling the transaction, with plaintiffs arguing that this subcommittee is giving the hospital to Deaconess “for virtually nothing in return.”

Save Jennie Stuart also alleged fundamental flaws in the transaction process, including the non-disclosure of material information to the full Governing Board, the lack of valuation, and conflicts of interest among members of the governing board.

The transaction, they said, is the result of a “rushed” process helmed by committee members who lack the necessary expertise to navigate these kinds of mergers and acquisitions.

In response to the lawsuit, the Jennie Stuart Health Board of Trustees issued a statement saying that the proposed transaction with Deaconess “will improve the quality of local health care and strengthen our health system’s ability to continue serving our patients as a long-term pillar of the Hopkinsville community.”

The board said it conducted a “comprehensive” evaluation process, looking at several potential options for the hospital’s future with financial and legal advisors. It also engaged with the community throughout the process, it said.

“It’s incredibly disappointing that this group has decided to pursue a wasteful and meritless lawsuit, which potentially puts the benefits Jennie Stuart patients would receive at risk, instead of working with us to give our community the health system we all deserve,” the board said.

THE LARGER TREND

According to a July Kaufman Hall analysis, mergers and acquisitions among hospitals and health systems is to move away from larger combinations and instead to pursue strategy over scale.

Sometimes this strategy entails gaining access to new tools, technologies and capital investments, and in some cases the goal is to support one of the partner’s efforts at system reconfiguration, said Kaufman Hall.

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.