Deaconess Medical Center has severed its 17-year partnership stake in Inland Northwest Health Services as part of a lawsuit settlement announced Thursday.
The governing board of INHS will now be dominated by Providence Health Care, which operates Sacred Heart Medical Center. Providence will appoint five of the board’s eight members. The remaining three will be appointed by the Empire Health Foundation, and must include a member of the Spokane County Medical Society.
All sides hailed the agreement as “mutually beneficial,” although declined to discuss specifics – including whether Deaconess paid any or all of the $7 million that INHS claimed it was owed.
Executives from both companies said they were restricted by a confidentiality clause, and Providence spokeswoman Sharon Fairchild said her organization did not foresee pursuing any major new initiatives that haven’t already been launched.
The lawsuit erupted in October 2009 over the disputed ownership of a license issued by technology firm MEDITECH.
INHS for years has used the license to operate its acclaimed electronic medical records network used by more than three dozen hospitals across the region.
Deaconess, which along with Valley Hospital and Medical Center was bought by Tennessee-based Community Health Systems Inc. in late 2008, was a co-founder of INHS in the mid-1990s. By collaborating with rival Sacred Heart Medical Center at the time, all the hospitals in the region were able to pool assets and also share in the costs of operating helicopter ambulances, long-term rehabilitation services and jumped ahead of national trends in adopting electronic medical records using the license initially procured by Deaconess.
While INHS operated as an independent organization, Deaconess and Sacred Heart retained rights to appoint an equal number of directors who ran the board. Under this scenario INHS grew into a successful not-for-profit venture that today has 1,100 employees and a budget of about $201 million.
But the collaboration became entangled in the Deaconess sale to for-profit Community Health. The new owner wanted better access to billing histories and procedures after INHS began charging different rates. INHS said it was obligated to charge Community Health fair-market rates because of its for-profit status – regardless of its status as a co-founder and partner.
The lawsuit brought by INHS accused Deaconess of breaching contracts and bad faith dealings when the hospital declined to pay its disputed bills. The episode led to worries that the electronic medical records system might collapse.
Within months INHS chief executive Tom Fritz threatened to withdraw his electronic records staff from Deaconess and Valley. The sides then diffused the situation and the case progressed through the courts.
The new agreement cleanly transfers ownership of the licenses to INHS. And Deaconess and Valley will now be simply customers of INHS.