Hospitals’s Weblog

July 16, 2007

Orange County Judge Appoints Robert Jameson Provisional Director of IHHI

Filed under: Healthcare,Hospital,IHHI — hospitals @ 12:06 pm

PRNewswire/ — Before leaving the bench, Judge Jameson served as Presiding Judge of the Orange County Superior Court, Presiding Judge of the Court’s Appellate Division and Supervising Judge of Court’s Complex Civil Litigation Panel. He was named “Judge of the Year” by numerous organizations including ABOTA, Consumer Attorneys of California, the Orange County Bar Association Business Litigation Section and the Orange County Trial Lawyers.

July 11, 2007

Judge to appoint independent director for IHHI

Filed under: Healthcare,Hospital,IHHI — hospitals @ 12:18 am

OC Register/-An Orange County judge said today that he will appoint an independent director to the board of Integrated Healthcare Holdings Inc., seeking to break a deadlock on the board of the troubled hospital company.
Judge Gregory H. Lewis of Orange County Superior Court said he was putting the public’s interest ahead of those of warring shareholders and management at IHHI, which owns Western Medical Center-Santa Ana and three other hospitals in Anaheim, Orange and Santa Ana.
Lewis said he wanted a director who is “beholden to no one, with the sense, ability and intelligence to make an appropriate vote.”
Lewis said he would name one of two retired Orange County judges, C. Robert Jamison or Robert E. Thomas. He gave attorneys for shareholders and management until 3 p.m. today to agree on a choice.
A deadlocked board of directors at IHHI has prevented the company from refinancing its high-interest debt, putting the company into default with its lender and contributing to financial losses.

July 6, 2007

Chaudhuri buys stake in O.C. hospital group

Filed under: Healthcare,Hospital,IHHI — hospitals @ 12:00 am

Riverside physician was forced to withdraw from IHHI bid two years ago because of earlier bankruptcy.
Dr. Kali Chaudhuri, who two years ago was forced to withdraw a bid to be majority owner of a group of four central Orange County hospitals, has exercised a warrant to buy a minority stake in the same company, Integrated Healthcare Holdings Inc.

According to a filing with the Securities and Exchange Commission on Thursday, Chaudhuri, a physician and entrepreneur based in Riverside, has acquired 39.7 million shares of IHHI, which makes him the company’s second-largest shareholder.

A group of Orange County doctors led by Dr. Anil Shah, a Santa Ana cardiologist, is the largest shareholder in IHHI with 59.1 million shares.

Larry Anderson, president of IHHI, said the company plans to disclose further details about Chaudhuri’s shareholding in a filing with the SEC on Monday.

Chaudhuri sparked opposition from doctors and regulators in 2005 because of his financial past. In 2000, a chain of clinics that he owned, KPC Medical Management, went bankrupt, stranding 300,000 patients without medical records and owing $400 million to creditors.

As part of his agreement to withdraw from the 2005 deal, Chaudhuri got a warrant to buy stock in IHHI starting in 2007.

Chaudhuri couldn’t be reached for comment today.

IHHI, which had a net loss of about $19.8 million in the 12 months through March, is beset by turmoil, with shareholders and management fighting in court for control of the company.

An Orange County judge has said he plans to rule July 11 on whether to order IHHI to call a special shareholders meeting to elect a new director to the board. A new director could break a 3 to 3 deadlock on the board that has prevented the company from refinancing its high-interest debts.

IHHI owns Western Medical Center-Santa Ana, Western Medical Center-Anaheim, Chapman Medical Center in Orange and Coastal Communities Hospital in Santa Ana.

July 2, 2007

Judge hears arguments in hospital case

Filed under: Healthcare,Hospital,IHHI — hospitals @ 12:00 am

Hospital owner IHHI is at risk of default in dispute between shareholders and management.

IHHI, which owns four hospitals with about 12 percent of Orange County’s hospital beds, had a net loss of about $19.8 million in the 12 months through March, according to a company filing with the Securities and Exchange Commission. The company has been unable to refinance its high-interest debt because its six-member board is evenly split on a number of questions, according to court documents.

A group of doctors who own a majority stake in IHHI have asked for a shareholders meeting to elect a seventh member to the board to break the deadlock. The company’s president, Larry Anderson, has refused to call such a meeting, fearing it could put the company into default under its loan agreements, according to court papers.

Judge Gregory H. Lewis of Orange County Superior Court heard arguments today from attorneys representing the shareholders and the company’s management. Lewis said the financial health of IHHI is an important community issue.

“The court is very seriously concerned as to the impact on the citizenry of Orange County should events of default take place at IHHI,” Lewis said.

IHHI owns Western Medical Center-Santa Ana, Western Medical Center-Anaheim, Coastal Communities Hospital in Santa Ana and Chapman Medical Center in Orange. Western Medical Center-Santa Ana is one of just three trauma centers in Orange County where victims of life-threatening accidents or violence are taken for emergency treatment.

Stephan Cohn, an attorney representing shareholders, said IHHI pays $22 million a year in interest on its debts, including a mortgage loan at 15 percent and accounts-receivable financing at 37 percent.

The company’s lender, Medical Capital Corp. of Anaheim, offered in February to reduce the interest rates on IHHI’s debts, lowering its payments by about $5 million a year, but the refinancing wasn’t completed because of the board deadlock.

Medical Capital last month withdrew its refinancing offer and agreed to forebear for 90 days on declaring IHHI to be in default on its debts, which came due in March. As part of the forbearance agreement, Medical Capital won’t block IHHI’s board from firing Anderson and Bruce Mogel, the company’s CEO. Previously, removal of either Anderson or Mogel could have put the company into default.

David Robinson, an attorney for IHHI’s management, said shareholders have yet to produce a firm offer from a lender other than Medical Capital to refinance the company’s debts. He said the company could be forced into bankruptcy if no other lender steps forward.

Cohn said Medical Capital has agreed to refinance IHHI’s debts should the forbearance period expire without new financing in place.

Judge Lewis said he will rule by July 11 on whether to order IHHI to hold a shareholders meeting. Lewis is also considering a motion by IHHI’s management asking him to appoint a provisional director to the board.

At a meeting scheduled for Tuesday, IHHI’s board will consider appointing a seventh member to fill the vacant seat, said Dr. Anil Shah, IHHI’s top shareholder and a member of the board. The nominee is Albert Greene, chief executive of Hollywood Presbyterian Medical Center, Shah said.

March 26, 2007

Abusive litigation against physicians

Filed under: Healthcare,Hospital,IHHI,Quality,Tenet — hospitals @ 12:00 am

IHHI v. Fitzgibbons

In this case, a physician has appealed a court order denying his special motion to strike the complaint against him, based on the California anti-SLAPP (“Strategic Lawsuits Against Public Participation”) law.  The Litigation Center and the California Medical Association filed an amicus curiae brief in the California Court of Appeals to support Dr. Fitzgibbons.  The Litigation Center and CMA believe that physicians should be entitled to express their opinions on matters affecting the health of their patients, without fear that such expression will subject them to the burdens of an unfounded lawsuit.

Michael Fitzgibbons, MD, an infectious disease specialist practicing in Santa Ana, California, is the immediate past chief of staff of the Western Medical Center-Santa Ana (“WMCSA”) medical staff.  He remains on the medical staff executive committee.  Integrated Healthcare Holdings, Inc. (“IHHI”) is a publicly owned investment company, organized to own and manage health care facilities. 

During 2004, Tenet Healthcare Corporation sought to divest itself of many of the California hospitals which it owned, including WMCSA and three other Orange County hospitals.  Tenet entered into an agreement to sell those four hospitals to IHHI, which had been incorporated for that purpose.  Although IHHI is publicly owned, its principal stockholder has been described as being “notorious for his involvement in a massive bankruptcy of medical clinics which caused one of the greatest health care debacles in the history of California, leaving 300,000 patients without care and causing tens of millions of dollars in losses to physicians.”  When the proposed acquisitions were announced, a major area of concern was whether IHHI could fund the hospitals adequately. 

Both the Orange County Board of Supervisors and the California Senate held formal hearings to investigate the proposed acquisitions.  These hearings were reported in the Orange County Register, the Orange County Weekly, and the Los Angeles Times.  Eventually, though, the hospitals were sold, the California hospital licensing board approved the acquisitions, and IHHI began to operate them.

In May, 2005, IHHI reported to the SEC that it had received a notice of default on two loans that it had received to fund the acquisitions.  The effects of the claimed defaults were to suspend IHHI’s ability to obtain further loans, increase the interest rate on its outstanding loans, and make immediately due and payable almost $64 million in debt.  The SEC filing was the subject of a critical article in the May 17, 2005 Orange County Register.

On May 19, 2005, Dr. Fitzgibbons, through an e-mail sent to other physicians on the WMCSA medical staff, criticized the acquisitions and expressed doubts about the financial viability of IHHI.  Most of the information in the e-mail came from the Orange County Register article, which in turn came from IHHI’s own SEC filing.  Ultimately, the e-mail found its way into the hands of IHHI.

On June 23, 2005, IHHI sued Dr. Fitzgibbons for (1) defamation, (2) intentional interference with a contractual relationship, (3) negligent interference with a contractual relationship, (4) breach of contract, (5) breach of the duty of good faith and fair dealing, and (6) violation of the California unfair business practices statutes.  All of these counts were based on the May 19th e-mail.  Dr. Fitzgibbons “demurred” to the complaint (which means that he moved to dismiss for failure to allege a legally cognizable claim).  He also filed a special motion to strike the complaint under the California anti-SLAPP statute.  Cal. Code Civ. Proc. §425.16.

The trial court overruled the demurrer and denied the special motion to strike under the anti-SLAPP statute.  The court also awarded IHHI $1,925 in attorney’s fees and costs arising from Dr. Fitzgibbons’ motions.   Dr. Fitzgibbons appealed the denial of his special anti-SLAPP motion, although he did not appeal the overruling of his demurrer. 

On June 14, 2006, the Court of Appeal reversed, finding that IHHI had failed to demonstrate a probability of success.  It directed the lower court to grant Dr. Fitzgibbons’ motion to strike under the anti-SLAPP statute, and it awarded Dr. Fitzgibbons his costs on appeal.

August 1, 2006

California’s Court of Appeals decided that IHHI did SLAPP Dr. Fitzgibbons

Filed under: Healthcare,Hospital,IHHI,Tenet — hospitals @ 12:00 am

OCMA/- Medical staff leaders rejoice! California’s Fourth Appellate District Court of Appeals decided that Integrated Healthcare Holdings Inc. did SLAPP Michael Fitzgibbons, MD.

Many of us monitoring medical staff issues view this as upholding our right to speak up for our patients and the quality of care in hospitals. To refresh your memory, Dr. Fitzgibbons was chief of staff at Western Medical Center Santa Ana in 2003 when Tenet Inc. announced plans to sell it and three other hospitals in Orange County.

Dr. Fitzgibbons coordinated an effort on behalf of many physicians at WMCSA to purchase the hospital from Tenet. The sale created significant controversy. However, in 2004, IHHI, a newly formed company, purchased the four hospitals. Although disappointed, Dr. Fitzgibbons and the WMCSA medical staff agreed to support the new owners.

As a public corporation, IHHI reports its financial condition to the Securities and Exchange Commission. So to stay current about IHHI operations, Dr. Fitzgibbons monitored this reporting, as did others. Unfortunately, problems were revealed and local newspapers reported IHHI defaulted on some loans.

In a private e-mail, Dr. Fitzgibbons expressed grave concerns about IHHI’s financial condition and ability to maintain quality care at WMCSA. The leadership of IHHI was offended by this e-mail and sued Dr. Fitzgibbons for defamation and business interference.

The medical staff at WMCSA abhorred this action and established a defense fund to support Dr. Fitzgibbons. Tom Curtis, a veteran attorney in medical staff issues, led the defense.

Curtis claimed IHHI filed a SLAPP (Strategic Lawsuit to Prevent Public Participation). California law prohibits SLAPPs: Corporations cannot file lawsuits to prevent individuals from speaking out in the public interest.

News of the lawsuit sent a chill through knowledgeable medical staff leaders. The Orange County Medical Association, the California Medical Association and the American Medical Association rallied to support the medical staff at WMCSA. Drs. Howard Lang, Robert Pugash and John Hill–all veterans in past battles with errant hospital administrators–entered the fray.

In the first round, the Orange County Superior Court judge listened but did not hear the arguments placed before him. IHHI won. The legal fees escalated. The OCMA, the CMA and hospital medical staffs donated more to the defense fund. Dr. Fitzgibbons appealed. Tom Curtis sharpened his tongue. The CMA and the AMA filed a brilliant amicus curiae brief.

This time, the appellate judges HEARD and READ the arguments. The appeals court overruled the superior court. They decided IHHI filed a SLAPP to intimidate Dr. Fitzgibbons.

When Dr. Fitzgibbons was first sued, he could have cowered and begged to be released from the suit. But he chose the road of principle. He chose to challenge the administration’s efforts to silence him.

To promote the advancement of hospitals, medical staff leaders need to be critical of themselves and of administrations. The precarious financial situations of numerous healthcare institutions across the country require that medical staff leaders take corrective actions and lead these institutions into solvency.

We owe Dr. Fitzgibbons thanks for his tenacity. His willingness to suffer through a lawsuit so that medical staff leaders have the right to voice (or e-mail) their opinions gives us strength. The pain of his SLAPP was not in vain.

July 20, 2006

New Trend In Whistleblower Retaliation – Frame Him?

Filed under: Healthcare,Hospital,IHHI,Tenet — hospitals @ 12:00 am

Healthcare Law Blog/- Has California, the mother of many trends in the trendy business of healthcare inaugurated a new way of dealing with “obstructionist” whistleblower physicians?  Dr. Michael Fitzgibbons, a reputedly mild mannered, Clark Kentish, Republican physician in southern California was arrested in the parking lot of a Santa Ana hospital and charged with the possession with a loaded firearm, carrying a concealed weapon and brandishing a weapon. He was booked. His car was confiscated. He was strip searched and released on his own recognizance. This followed an apparently anonymous 911 tip to the Santa Ana Police Department that a person wearing black gloves and driving Dr. Fitzgibbon’s brown camry, was wildly waiving a pistol while driving the car through the streets of Santa Ana.

Dr. Fitzgibbons claimed that he owned neither the gun nor the black gloves found in his car by the police was  framed by someone upset with his opposition to the owner of Western Medical Center, Integrated Healthcare Holdings, Inc. (“IHHI”). The Orange County District Attorney’s Office declined to prosecute the case because of a lack of evidence. They had the defendant, the car, the gun, the black gun. They apparently did not have the witness.

Western Medical Center is a rather seedy, run down facility, that was one of three Orange County hospitals sold to IHHI by Tenet Corp.  The hospital serves mostly working class and poor residents who do not have health insurance.  Dr. Fitzgibbons is the head of infections diseases at the facility. Frustrated by IHHI’s refusal to fund capital improvements in the facility, Dr. Fitzgibbons began a campaign of public criticism of the facility, its owner, and an investor in the owner, Dr. Kali P. Chaudhuri, asserting that they were not financially viable and that they were more interested in closing the hospital and selling the real estate than in maintaining the facility.

IHHI in turn sued Dr. Fitzgibbons for slander and interfering in the company’s business. Last December, Dr. Fitzgibbons refused to accept IHHI’s offer to settle the lawsuit, if he agreed to pay his own attorneys fees.  Dr. Fitzgibbons persisted and won the lawsuit.  On June 14, the judge in the case determined that the doctor  had been truthful in his statements about the finances, but was exercising free speech rights in an effort of ensure quality patient care at Western Medical Center and that the IHHI lawsuit was a SLAPP suit (Strategic Lawsuit Against Public Participation). Before he had a chance to celebrate, he was in hand cuffs. If this trend continues it may provide a whole new career opportunity for those unemployed barbarians in the Capital One commercials.

June 20, 2006

Physician Has Right to Criticize Hospital Company, Says Court

Filed under: Healthcare,Hospital,IHHI,Quality — hospitals @ 12:00 am

HFMA/- A California appellate court dismissed a defamation lawsuit Integrated Healthcare Holdings Inc. brought against its former chief of staff, reports the Los Angeles Times. Michael W. Fitzgibbons, MD, wrote an e-mail message to other physicians, asserting that Western Medical Center-Santa Ana “appears to be underwater” after IHHI acquired the hospital and then defaulted on $80 million in loans in 2005. Integrated later made a payment on the loan, but it claimed that the hospital lost $500,000 from a contract that Blue Cross postponed after seeing Fitzgibbons’ e-mail. The court said that IHHI cannot use the legal system to stifle criticism and ordered the company to pay Fitzgibbons’ $100,000-plus legal fees. IHHI had offered to settle with Fitzgibbons in December, the Times notes, but the offer was declined.

In the discussion of the court’s opinion, Justice Richard Aronson wrote, “We have little trouble concluding Fitzgibbons’s e-mail message concerned ‘a public issue’ and ‘an issue of public interest’ under section 425.16, subdivision (e)(4).”  Aronson noted that the acquisition and operation by IHHI of four hospitals in Orange County had been the subject of public hearings before the California Senate and the Orange County Board of Supervisors, and had also been discussed in articles in newspapers and other periodicals. “The hearings and articles focused on IHHI‘s financial ability to successfully operate the hospitals, and the potential harm to the public should IHHI fail,” he wrote. “Fitzgibbons’s e-mail message expressing concern for IHHI‘s financial health and its ability to operate WMC falls squarely within these issues.”

June 14, 2006

INTEGRATED HEALTHCARE HOLDINGS, INC., Vs MICHAEL FITZGIBBONS

Filed under: Healthcare,Hospital,IHHI,Quality,Tenet — hospitals @ 12:00 am

California Anti-SLAPP Project

The order denying Fitzgibbons‘s special motion to strike is reversed, and the trial court is directed to enter a new order granting the motion in its entirety. Fitzgibbons is entitled to his costs on appeal.

Factual and Procedural Background

In 2004, Tenet Healthcare Corporation sought to divest itself of a number of California hospitals it owned, including four in Orange County. Among those seeking to purchase the Orange County hospitals was IHHI, a holding company formed for this purpose. As its president concedes, IHHI is a “heavily debt leveraged” company “trying to develop sufficient cash flow to survive in a difficult healthcare market.” Because of concerns about IHHI’s financial ability to operate the four hospitals, the County of Orange and the California Senate conducted public hearings on the proposed acquisitions.

Among the hospitals IHHI sought to purchase was Western Medical Center-Santa Ana (WMC), a 282-bed acute care facility and one of only three trauma centers in Orange County. WMC’s medical staff opposed IHHI’s acquisition of WMC, due to concerns about both IHHI’s financial stability and its principal, Dr. Kali P. Chaudhuri, who had been involved in the failure of a previous healthcare company. One of the medical staff opposing IHHI’s purchase was Fitzgibbons, a member of the medical staff’s medical executive committee and WMC’s former chief of staff.

The medical staff dropped its opposition to the purchase when they entered into a written agreement with IHHI, effective January 1, 2005. Under the three-year contract, WMC’s medical staff received significant financial oversight of WMC’s operations, and Dr. Chaudhuri agreed to limit his interest in IHHI to a minority share. The agreement also assured WMC that IHHI had “a lender commitment for a working capital line of credit loan in the approximate aggregate amount of $50 Million, to be available to the Hospital no later than ten (10) days following the closing of the purchasing parties’ acquisition of the Hospitals.”

Under the heading, “Consideration,” the agreement provided: “The Parties further agree that this Agreement will be submitted to [the Department of Health Services] as part of the Hospital’s license application process. In consideration for the binding and enforceable commitments of IHHI, and in reliance upon these commitments, the Medical Staff of Western Medical Center-Santa Ana will express public support for the acquisition and operation of IHHI of, and issuance of hospital licenses to IHHI for, the Hospitals, in accordance with the commitments made herein, including being represented at any public hearings on this proposed acquisition and delivering to DHS (Mark Helmar) a letter supporting IHHI’s acquisition and licensure of the Hospitals.”

*2 IHHI’s acquisition and licensing of the hospitals was completed in March 2005. On May 9, 2005, the lender on IHHI’s $50-million acquisition loan, and a $30 million non-revolving working capital line of credit, served IHHI with a notice of default. The default was disclosed in IHHI’s filing with the Securities Exchange Commission (SEC), and reported in an article in the May 17, 2005, Orange County Register, which cited an analyst’s warning that IHHI needed to “find another investment partner ‘really quickly’ or the whole thing could be headed for bankruptcy court.”

Two days after the article appeared, Fitzgibbons sent an e-mail message to medical executive committee members and other individuals Fitzgibbons believed might offer financial assistance to the hospital, expressing concern IHHI could be headed for bankruptcy. The e-mail stated: “By the way, the hospital appears to be underwater and I don’t think IHHI can get an investor to pony up the $20 million, for the 60-70 million shares of stock which they are selling. Admissions are down 20%. They got a reduction of costs by dumping Tenet by 13%, and increased insurance payment of 7% (but that is neutralized by the factoring). Then their nursing salaries went up 8%-so they’re in the red. No way to get out. That is ominous. What would the buyer get buying IHHI stock? Control of IHHI, but not the land? Sounds like its going BK. Get ready. Now, if the doctors had been in the deal … interest rates would have been better say 9%? ?, would have had our capital say $10 million, and admissions would have been even. Result happiness. Sad. It might work if they came to us on hands and knees and gave us the stock in exchange for our telling the world we support them, and get a refinance at a better rate? ? ? Who would lend? Ligon’s the CFO’s family supposedly has money. The loan default is classic ‘chaudhuri.’ I guess Mr. Mogel won’t be pooring [sic ] expensive brandy on the table today. Mike Fitzgibbons.”

On June 23, 2005, IHHI filed a complaint against Fitzgibbons based on his May 19 e-mail message, seeking damages for (1) defamation; (2) intentional interference with a contractual relationship; (3) negligent interference with a contractual relationship; (4) breach of contract; (5) breach of the duty of good faith and fair dealing; and (6) violation of Business and Professions Code section 17200 et seq. The complaint alleges Fitzgibbons’s e-mail message was forwarded to Blue Cross/Wellpoint, Inc., (Blue Cross) with whom IHHI had been negotiating for higher insurance payments, and the e-mail message provoked concern on the part of Blue Cross, stalling negotiations. IHHI alleges this delay has cost it over $500,000.

Fitzgibbons filed a special motion to strike under the anti-SLAPP statute, which the trial court denied. Fitzgibbons now appeals.

November 1, 2005

California investors file complaints against Integrated Healthcare Holdings, Inc. and hope to build a class action lawsuit

Filed under: Healthcare,Hospital,IHHI,Tenet — hospitals @ 12:00 am

Investors visit LawyersandSettlements.com to submit complaints of securities and stock fraudLos Angeles, California ­ Investors who purchased Integrated Healthcare Holdings, Inc. (NASD: IHHI) stocks or other securities between March 1, 2005 and May 17, 2005 may qualify for inclusion in a possible class action lawsuit. These investors only have until November 28, 2005 to submit their case on LawyersandSettlements.com.As with similar securities fraud cases, investors hope to receive compensation for being induced to buy stocks until false pretenses.

Integrated Healthcare Holdings, Inc. (IHHI) allegedly did not disclose pertinent details about a $30 million dollar investment transaction from Orange County Physicians Investment Network, LLC (OCPIN). IHHI was to receive the $30 million prior to finalizing an acquisition of four Orange County hospital facilities from Tenet Healthcare Corp. The acquisition was finalized and filed with the SEC in March 2005 but IHHI didn’t disclose the full details until May: they had only received $10 million of the promised $30 million.

All investors and other involved parities are invited to submit their complaints against Integrated Healthcare Holdings, Inc.; several leading legal professionals, advertising on LawyersandSettlements.com, will provide free case evaluations. To learn more, visit: http://www.lawyersandsettlements.com/case/ihhi_securities

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