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Hospital impasse prompts bill

Wed., Feb. 3, 2010

Senate panel considers law to settle deadlock

OLYMPIA – A dispute between Spokane’s two hospital systems spilled over into the legislative session Tuesday as a Senate panel considered changing a law that would determine how a judge could settle any impasse.

The dispute involves Inland Northwest Health Services, a nonprofit jointly operated by the companies that own Providence Sacred Heart Medical Center and Deaconess Medical Center. Inland Northwest Health Services operates an electronic medical records system, an air ambulance service and other systems shared by hospitals, clinics and doctors in the region.

Each company has a vote on the nonprofit’s board, but disagreements present a dilemma, said state Rep. John Driscoll, D-Spokane. Under state law, if a nonprofit board is deadlocked and it takes its dispute to Superior Court, a judge has few options other than dissolving the nonprofit as a corporation.

“This is a very valuable corporation we want to preserve and have grow,” said Driscoll, a former Sacred Heart administrator who sponsored a bill in the House identical to the one that the Senate Judiciary Committee is considering.

“A judge should have a full range of options” to settle the dispute like the courts can settle disputes within for-profit corporations.

Joe King, a representative for Inland Northwest Health Services, said the dispute is a result of a “culture clash” between Community Health Systems Inc., a for-profit company that purchased Deaconess and Valley Hospital in 2008, and Providence Health Care, a nonprofit that owns Providence Sacred Heart Medical Center and Providence Holy Family Hospital.

Inland Northwest Health Services, also known as INHS, sued Community Health Systems last fall in a dispute over billing. Last month, INHS threatened to pull its medical records staff out of Deaconess but backed off after the hospital agreed to make monthly payments for the services.

The dispute on the INHS board was “close to impasse,” King said. “If they end up in front of a judge, the only option the judge has is a fire sale.”

But William Gilbert, chief executive officer of Deaconess, said Community Health Systems understands the importance of the services INHS operates: “We have no interest in damaging those services.”

Stellman Keehnel, an attorney for Deaconess’ previous owner, Empire Health Services, said the Legislature shouldn’t get involved in pending litigation, referring to the lawsuit over INHS. The bill as proposed, with an emergency clause, is an effort to tell a judge in the case what to do.

INHS has articles of incorporation that spell out how to handle assets if there’s an impasse on the board, he added. “There would be no fire sale.”

Keehnel agreed the state’s nonprofit statutes are “a mess,” but the Legislature should take its time to rewrite them rather than trying to cram something through a 60-day session.

Sen. Adam Kline, a Seattle Democrat who heads the Senate Judiciary Committee, said he wasn’t as concerned about the fight between the hospitals as the need to address deficiencies in the statutes.

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