Community Health Systems Professional Services Corp., a subsidiary of Franklin, Tenn.-based Community Health Systems, filed a lawsuit against Columbus, Ga.-based St. Francis Hospital earlier this month over a deal that fell through. Now, St. Francis has asked the court to dismiss the lawsuit, calling the allegations "demonstrably false."
St. Francis began exclusive talks with CHS in April, but the hospital ended those discussions July 29. At that time, St. Francis said it was not in exclusive talks with any company. However, the following day, the hospital announced it had signed a letter of intent to be acquired by Brentwood, Tenn.-based LifePoint Health.
CHSPSC filed a lawsuit seeking to recover more than $5 million invested in the proposed deal to take over the financially troubled hospital. CHSPSC claims that St. Francis' deception included intentional omissions that were intended to induce CHSPSC into "fronting St. Francis $5 million."
CHSPSC specifically claims it would have not paid a $5 million deposit if it had known St. Francis was under audit by the Department of Housing and Urban Development and the Office of Inspector General.
However, St. Francis is denying those allegations, claiming CHSPSC learned of the alleged legal and regulatory problems during due diligence and nonetheless decided to move forward with the transaction.
"This non-sequitur reveals CHSPSC's claims of fraud for what it really is: an eleventh-hour negotiation ploy to drive down the acquisition price. Indeed, after CHSPSC claimed it was 'shocked' to learn of the HUD-OIG audit and report, it quickly followed up with a substantial modification of its original purchase proposal. St. Francis would not give into these strong-arm tactics," stated St. Francis in its motion to dismiss the case.
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