Kansas to get little back from sale of nonprofit hospital

November 2, 2017

TOPEKA, Kan. (AP) — A for-profit partnership will not be required to set up a charitable foundation as part of its acquisition of a charitable nonprofit hospital in Topeka, Kansas Attorney General Derek Schmidt said.

The decision means Kansas taxpayers will not receive compensation from the sale of St. Francis Health Center, which has been tax exempt since it was founded in 1908, the Lawrence Journal-World reported .

The University of Kansas Health System and Ardent Health Services completed acquisition of St. Francis Health on Wednesday, paying $1, plus any working capital the hospital had when the sale closed.

The deal closed after Schmidt approved a letter Tuesday that said the buyers won’t need to set up a charitable foundation, which has been done in the past in Kansas when other charitable hospitals were converted to for-profit enterprises.

He said the sale is unlikely to produce any net proceeds and any remaining liabilities would need to be paid after the closing. He added that since St. Francis was part of the Sisters of Charity of Leavenworth, a not-for-profit health system, any remaining net proceeds would go to that system for its charitable mission.

The hospital’s new owners have agreed to provide charitable care for the next three years, which includes treating Medicare and Medicaid patients and the uninsured. The hospital, which would have been closed if it wasn’t sold, will remain open and a new partnership will put at least $50 million in new capital into the hospital over three years, Schmidt said.

“The most important community benefit is to maintain health care services in the community,” he said. “With the stated intention of SCL to close St. Francis Hospital due to its continuing losses absent a sale, maintaining hospital services is a key benefit to the community.”

Ardent President and CEO David Vandewater said Wednesday the partnership is committed to providing charitable care for more than three years at what is now called the University of Kansas Health System St. Francis Campus.

Kansas does not require the establishment of charitable foundations or trusts when a nonprofit hospital is converted to a for-profit institution but it has been done in the past. The theory is that the public should be reimbursed for the hospital’s previous tax-exempt status.

For example, when Wesley Medical Center in Wichita was sold to HCA in 1985, $200 million in proceeds was used to establish the Kansas Health Foundation, which funds research and community-based programs to improve the overall health of Kansas residents. An additional $30 million was set aside to establish what is now known as United Methodist Health Ministry Fund, which operates safety-net clinics in some parts of Kansas.

Schmidt, however, said St. Francis had effectively been put up for auction, and the market value of the assets was set at only $1. He noted Wesley Medical Center sold for $265 million.


Information from: Lawrence (Kan.) Journal-World, http://www.ljworld.com

Update hourly