INHS billing fight flares

Inland Northwest Health Services plans to pull its electronic records staff out of Deaconess Medical Center as a multimillion dollar fight over unpaid bills worsens.

Tom Fritz, chief executive of INHS, accused Deaconess’ new owners of exploiting the electronic medical records system and putting INHS in financial jeopardy by refusing to pay $6.4 million.

Deaconess, now owned by Community Health Systems Inc., the nation’s largest chain of hospitals, has balked at the bill and said it is concerned about “a lack of transparency” at INHS regarding its financial, operational and legal activities.

The dispute has already resulted in a lawsuit, but the move by INHS to withdraw its 29 computer technology employees from Deaconess and sister facility Valley Hospital and Medical Center starting next week ups the stakes for all sides.

Fritz said he will require two months of prepaid fees totaling more than $1.4 million along with a new contract of one to three years to keep INHS employees at Deaconess and Valley.

“This dispute is not about the people who work at Deaconess and Valley,” he said. “It’s a corporate issue.”

But it is another sign of the strained relations between Spokane’s two hospital systems.

Deaconess and Valley, along with Providence hospitals Sacred Heart Medical Center and Holy Family, formed INHS 15 years ago to cut out money-losing duplicative services such as air ambulance, rehabilitation and fledgling electronic medical records.

The collaboration was an unusual step and had drawn praise as INHS turned those services into successful ventures.

INHS continues to be governed through a board of directors controlled equally by the Community Health hospitals and the Providence hospitals.

The dispute puts INHS in the awkward position of filing suit against one of its founding members.

Deaconess officials in a statement issued Tuesday said they have repeatedly asked to review INHS’s books and records, “a basic, statutory right of the member organizations – but have been repeatedly denied.

“At the time of the close of the Empire transaction, we prepaid INHS for four months of service and asked that future invoices be prepared in a transparent and detailed manner. When that did not happen, we disputed certain charges in an effort to get a detailed accounting.”

Fritz said INHS has complied with the hospitals’ demands, presenting the financial information dozens of times upon request.

Deaconess and Valley used to receive the electronic medical records services at cost. But when Community Health bought those hospitals in September 2008, Fritz said, nonprofit INHS was prevented by tax laws of providing services at a discount to a for-profit company. He said all sides understood the changes and agreed to hire a third-party expert to determine a fair market price for the electronic records services.

“They knew before they bought Deaconess and Valley that they would have to pay fair market value,” Fritz said. “Their refusal to pay is hurting our ability to continue successful services and collaborations that have been recognized nationally as successful models.”

He said the problem and pending decision is akin to a nonpaying customer.

“If I was another company in town and didn’t pay, say, my Avista bill, or the bill from the phone company, we’d have a problem,” he said. “It’s the same here.”

Sharon Fairchild, vice president of communications for Providence hospitals, said Sacred Heart and Holy Family are worried about the financial viability of INHS if the dispute drags on.

“It’s a customers issue for them. That’s how we’re looking at it,” she said.

INHS ended 2009 with a financial loss, Fritz said.

He declined to disclose the results, saying accountants need to first complete their audit before numbers can be officially released.

INHS enjoyed tremendous success in 2008. The company, incorporated as a nonprofit and reported revenues of $113.8 million and a $3.3 million profit, according to tax returns on file with the Internal Revenue Service.

That excess cash was reinvested, for example, to help pay for new aircraft and vehicles operated by INHS’s air ambulance service Northwest MedStar.