Health Fraud Investigator Seeks Legislative Inquiries In Missouri and Kansas Alleging That Attorneys General Blocked His Investigation And Suppressed Key Evidence In Recent Health Midwest Litigation

An expert in health care fraud, hospital valuation and executive compensation will today ask the Senate Judiciary Committees, respectively, of Missouri and Kansas to undertake an immediate inquiry into the conduct of the Attorneys General of both states in relation to their defenses of the recent separate but nearly identical lawsuits by Health Midwest, a large not-for-profit hospital system in Kansas City that recently sought to circumvent the AGs regulatory review of its sale to HCA, Inc.

James Unland, President of The Health Capital Group, who was retained urgently as an expert by both AGs on January 2nd and 3rd, states in separate letters to the Missouri and Kansas Senate Judiciary Committees that shortly after presenting his preliminary findings to the respective AGs in mid-January he was blocked from pursuing further crucial evidence showing that Health Midwest was much more viable financially in 2002 than their public relations image portrayed and that, in addition, at least two qualified, highly creditworthy not-for-profit hospital systems (Sisters of Charity of Leavenworth, Kansas and Saint Lukes Health System in the Kansas City area) were effectively prohibited from bidding on Health Midwest during an unwarranted rush to sell in the late summer of 2002, thereby making a strong legal case for 'breach of fiduciary duty on the part of Health Midwests board.

But neither AG really wanted to hear my findings," said Unland, who has done fraud investigations and fraud prevention work for hospitals, medical practices, and the U.S. Justice Department. The Missouri AG was literally frightened at the thought of being blamed for stopping or delaying this deal and shut his ears to my proof of significant wrongdoing on the part of Health Midwests board. The Kansas AG withheld key evidence that now renders Judge Fosters ruling in Kansas sadly off base."

Unland said that Health Midwest was rushing to sell late last summer after admitted months of behind-the-scenes discussions with for-profit hospital companies, thus advantaging them in the short bidding process. It also appeared odd to Unland that the rush to sell came at a time when Health Midwest was enjoying a substantial financial recovery due to the effort of consultants who had worked for a year to significantly improve the not-for-profit hospital systems operating income. This rush to sell at the exact time of a marked financial recovery made Unland suspicious that Health Midwest might, by the end of 02, actually be completely viable and not have to sell out at all but, when he requested more financial statements and access to crucial depositions, he was blocked from doing so by the AGs, with Nixons legal staff in Missouri saying 'dont go there, we cant go there, we wouldnt want to be blamed for stopping this deal!

Unlands letter to the respective state senate judiciary committees also discloses that a so-called expert in 'the fairness of the bidding process retained by the AGs to provide expert testimony as to whether the bidding process was fair, never actually interviewed any of the bidders or potential bidders. Unland contacted the CEOs of Sisters of Charity and Saint Lukes Health System on his own initiative after reviewing correspondence in the case indicating their frustration with Health Midwests rushed 'bidding process. Both CEOs confirmed that they did not believe they ever received a fair and reasonable chance to make an offer, especially in light of what appeared to them to have been an unrealistically short bidding time-frame. For example, Saint Lukes was not told of the September 5th bidding deadline until September 3rd and indicated the willingness to so testify under oath. Yet, despite Unlands strong urgings to the Missouri and Kansas AGs, these organizations were never deposed or even asked for affidavits, let alone asked to testify.

At issue here legally," said Unland, is the longstanding and widely accepted legal principle relating to the obligation of the board of a 'charitable organization to perpetuate its 'charitable purpose first and foremost-meaning for practical purposes, exploring all reasonable alternatives to stay as a not-for-profit 'charitable organization. In this instance that would mean that Health Midwest should have talked with the two creditworthy not-for-profit health systems in its own 'neighborhood before engaging in serious talks with the for-profit hospital companies. Then if a sale was still indicated, at the very least Health Midwest should have put the not-for-profits on a level playing field instead of informing them very late in the game about the bidding process, effectively shutting them out, in contrast to months of behind-the-scenes talks with the for-profits."

Unland also indicated that despite his repeated urgings, neither Attorney General consulted with the U.S. Justice Department in regards to the AGs own allegations of 'excess compensation of certain Health Midwest executives (so-called 'intermediate sanctions in Section 4958 of the Internal Revenue Code governing 'excess compensation of executives of not-profit-hospitals and potentially significant civil money penalties relating to both executives and board members).

This whole episode is like an iceberg, the truth lies beneath the surface. If the legislative oversight committees do their jobs, theyll bring out all the facts," said Unland, adding that the recently passed Kansas Senate Bill 44 would not even have been necessary had the AGs done their job. Senate Bill 44 was passed by the Kansas State Senate on an emergency basis after Nixon of Missouri surprised Kansas by settling with Health Midwest on or about January 23rd, contravening the AGs mutual agreement to coordinate their respective efforts in the very similar cases.

It was comical in a pathetic way. Neither AG knew what the other was doing. One thing they did seem to do well was to block my investigation. Its like they retained me just to give the appearance of vigorously prosecuting their cases instead of actually doing so. That doesnt sit well with me. Im used to working with law enforcement people who mean business, and a half-hearted prosecution of a case by an Attorney General doesnt serve the public interest."
The gag orders by the judges in these cases also bothered Unland, who recommends that the senate judiciary committees interview the respective judges. Gag orders often turn out to be excuses to hide the truth from the public, which really is what has happened here," said the fraud investigator, noting that he did not sign a gag order after learning that his fees would be paid by Health Midwest, an arrangement that he considered a conflict of interest, if not out rightly suspect.

Im calling for these inquiries not necessarily to stop the Health Midwest deal with HCA, but because there are major public policy issues here-most notably the issue of whether Attorneys General of sovereign states should have the fortitude to uphold laws requiring boards of 'charitable organizations to, above all else, give their first and best efforts to try to honor the charitable purposes of such organizations prior to rushing to sell out to for-profit companies, irrespective of how much money is involved. There is much literature now about too many not-for-profit hospitals in the U.S. having been sold without proper disclosure, proper community impact studies or proper, open public scrutiny.

Its time for the facts here to see the light of day."

The actual texts of Unlands requests for legislative inquiries and other information can be found at: www.CapitalExperts.com/KansasCity.htm

CONTACT: James Unland by phone at 1-800-423-5157 or email at: HealthCapitalGroup@yahoo.com

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