Owner of Deaconess sued

Inland Northwest Health Services has sued the owner of Deaconess Medical Center, alleging breached contracts and bad faith dealings that imperil the region’s acclaimed electronic medical records network.

The lawsuit filed in Spokane County Superior Court this week takes aim at the disputed ownership of a license issued by technology firm MEDITECH. The firm’s technology serves as the backbone of the records network used by 38 hospitals and many physicians and clinics.

In recent months Community Health Systems Inc., the Tennessee corporation that bought Deaconess along with Valley Hospital and Medical Center, began charging INHS $150,000 a month for using the license.

At the same time, according to the lawsuit, Community Health took the extraordinary step of sending termination letters to many of INHS’ small, rural hospital customers that use electronic medical records.

INHS claims in its lawsuit that the termination notices are invalid. It argues that if the notices from Community Health are allowed, “these hospitals, their patients, and their communities will be placed at serious financial and clinical risk of harm.”

The use of electronic records allows the hospitals and doctors to view a patient’s health history, which leads to better care and “has been heralded as a model for the nation at a time that electronic medical records are being touted nationally as vital to the improvement of the nation’s health care system,” the lawsuit says.

Community Health executives declined interview requests Tuesday. They are awaiting formal service of the lawsuit.

“Surprisingly, our representatives on the INHS Board, and perhaps other Board members, were unaware that INHS was planning to undertake this legal action,” Community Health said in a statement.

Tom Fritz, chief executive officer of INHS, said he would not comment on the allegations outlined in the lawsuit. He declined to comment on the assertion that neither he nor other INHS executives and board members gave Community Health leaders at least courtesy warning of the pending lawsuit.

The lawsuit alleges two counts of breach of contract, one count of unjust enrichment, and one count seeking a judgment that would resolve the dispute in favor of INHS over the ownership of the lucrative MEDITECH license.

The previous owner of Deaconess, community-based nonprofit Empire Health Services, along with Providence Sacred Heart Medical Center, founded INHS in an unusual collaboration to share the costs of operating air ambulance services, operate St. Luke’s Rehabilitation Center, and bolster efforts to build a network of hospitals using electronic patient records.

The INHS board of directors continues to reflect the roots of that collaboration: Three seats are held by Providence, three by Community Health, one by Dr. Brian Seppi representing the Spokane County Medical Society, and one by Fritz, the CEO of INHS.

However, the partnership has become increasingly strained in recent years as Deaconess struggled financially and Sacred Heart grew in scope and financial might.

Last year the two hospital systems quarreled over the future of INHS – especially over ownership of the MEDITECH license – on the eve of Community Health’s purchase of Deaconess and Valley hospitals.

Sacred Heart eventually filed suit. In response, Community Health threatened to walk away from its $156 million cash and debt purchase of Deaconess, a move many believed would send the century-old medical center into insolvency.

Sacred Heart withdrew its claim.

While Sacred Heart is not listed as a party to the lawsuit, it does play a role in the dispute.

Dr. Andrew Agwunobi, CEO of Sacred Heart’s regional parent company, said the hospital’s legal staff recently discovered a 13-year-old document from its archive that confirms INHS owns the MEDITECH license.

He presented it to INHS, which has been fighting Community Health’s ownership claims and cash demands.

While Deaconess may have been the original MEDITECH licensee, Agwunobi said, the document confirms Deaconess transferred ownership as part of the creation of INHS.

“We are not taking a position in this lawsuit,” he said. “What we know is that we are absolutely sure that the intent of the founding of INHS was for INHS to own the MEDITECH license to serve all of the health care organizations in the community.”