LifePoint still pursuing St. Francis acquisition after recent audit findings

A Brentwood, Tenn., company that is working to purchase St. Francis Hospital said in a statement Monday it would continue to pursue the acquisition despite the findings of a recent U.S. Department of Housing and Urban Development audit of the Columbus hospital.

"While the proposed partnership between LifePoint Health and St. Francis Hospital is still in a due diligence phase, St. Francis has been fully transparent with us in this process, and the recent audit report issued by the Office of Inspector General (OIG) for the U.S. Department of Housing and Urban Development is consistent with our understanding of the related issues," said the statement from Michelle Augusty, senior director of communications for LifePoint Health. "Based on the report, we are confident that the steps St. Francis has taken and their continued efforts are proving effective."

Specifically, the audit report dated Sept. 3, says the hospital "submitted inaccurate financial information, improperly disbursed mortgage proceeds, incurred an unauthorized liability, and subjected mortgage funds to bank sweeps."

Last November, St. Francis executives termed a $30 million financial hole an "accounting inaccuracy." St. Francis publicly disclosed at that time it had suspended Chief Financial Officer Matt Moore and that he had been "permanently relieved of his duties" on Nov. 14. Longtime President and Chief Executive Officer Robert Granger, who had been a chief financial officer prior to coming to St. Francis, resigned in March.

"We are pleased to continue moving through due diligence and are confident that St. Francis' track record of being a leading healthcare provider in Columbus and the surrounding area will continue," Augusty's statement read.

The audit report initiated by HUD and its Office of Hospital Facilities paints a picture of a Columbus hospital that severely lacked financial oversight. It said management failed to put in place "adequate controls," "internal controls" and "written policies and procedures" to make sure the hospital's $210 million mortgage insured by HUD was administered properly under federal regulatory requirements.

St. Francis Hospital sought HUD's assistance for the massive renovation and expansion of its campus, a project launched in October 2011, increasing its overall space from about 600,000 square feet to nearly 1 million square feet. It included building two large structures -- clinical services and medical office towers -- with a new Heart Hospital and Women's Hospital. Although it offers an array of services, St. Francis is best known as the city's heart surgery center.

St. Francis Hospital Inc. applied for a Federal Housing Administration loan in June 2011, covering $210 million of cost, the report said. It fell under what is known as Section 242 of the National Housing Act, which helps hospitals across the nation finance projects affordably, while providing mortgage insurance. The goal is to improve and expand health care, with HUD itself boosting its general insurance fund.

LifePoint said it will bring expertise in areas that St. Francis has been lacking.

Another finding in the audit report pointed to the hospital's board of trustees and its chairman, Richard "Bo" Bradley, saying some of the members had "potential conflicts of interest" because of their connections to Columbus Bank and Trust, a division of Columbus-based Synovus Financial Corp., with the hospital seeking a line of credit after the expansion to pay its bills.

"The complexities of today's financial and regulatory environments -- particularly in the healthcare industry -- are challenging for any organization to navigate," the statement read. "LifePoint is skilled in this area, and we have proven successful in supporting more than 65 hospitals across the country in managing financial controls and regulatory requirements to promote compliance and allow hospitals to focus on what they do best -- providing quality care close to home. By partnering with LifePoint, St. Francis will be in a position to resolve the issues identified by the OIG related to financial controls, compliance and the implementation of policies and procedures."

There is no timeline for the deal with LifePoint to close, but St. Francis officials have said it could be done by the end of the year.

While LifePoint moves forward another St. Francis suitor is taking legal action against the Columbus hospital. The parent company of Community Health Services, CHSPSC, in early August filed a federal lawsuit seeking to recover more than $5 million it spent on a "good-faith initial deposit" as part of that possible deal before it dissolved sometime in July.

CHSPSC claims that St. Francis Hospital "has intentionally hidden and lied about material facts regarding the hospital's problems," and it wants its $5 million-plus back.

St. Francis, in a response to the suit in U.S. District Court, Middle District of Georgia, calls the claims "demonstrably false." St. Francis also has asked Judge Clay Land to dismiss the suit.

LifePoint currently has an executive at St. Francis as the two hospitals work through the terms.

-- Staff writer Tony Adams continuted to this report.

This story was originally published September 7, 2015 at 5:41 PM with the headline "LifePoint still pursuing St. Francis acquisition after recent audit findings ."