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The Journal Gazette

  • Brian Bauer

Saturday, November 04, 2017 1:00 am

Lutheran owner sues fired CEO

Community Health alleges breach of contract

SHERRY SLATER | The Journal Gazette

At a glance

Community Health Systems

Business: Parent company of health care providers in 20 states, including Indiana

Headquarters: Franklin, Tenn.

Hospitals: 129 owned, leased or operated

Beds: About 21,000

Stock: Traded on the New York Stock Exchange under the symbol CYH

Just days after reporting a $110 million third-quarter loss, Community Health Systems has filed a lawsuit accusing former Lutheran Health Network CEO Brian Bauer of breach of contract.

The lawsuit, filed in Circuit Court in Williamson County, Tennessee, names as defendants Bauer and the unknown person or persons behind a Facebook account under the alias “Sajin Young.”

The filing alleges both Bauer and the “Sajin Young” poster defamed and disparaged CHS to undermine the company's business relationships. The defendants are accused of trying to drive away patients and physicians and drive down Lutheran Health Network's value.

The plaintiff is asking for unspecified damages and for Bauer and “Sajin Young” to be ordered to stop publicly criticizing CHS.

Bauer provided the following statement to The Journal Gazette on Friday: “I've been advised by counsel not to comment on litigation, but I can assure you these allegations are without merit.”

A CHS spokeswoman declined to comment beyond what was outlined in the 39-page lawsuit.

Among the allegations against Bauer, CHS says he shared confidential information with IU Health in violation of CHS' stock option agreement.

The lawsuit contends Bauer is subject to the agreement's confidentiality and non-disparagement clauses because from 2012 to 2014, Bauer cashed in 3,000 stock options for a total profit of more than $74,000.

The filing says proof of Bauer's breach of contract could be found in last week's news.

IU Health last week announced plans to open a primary care office in Fort Wayne early next year. During an exclusive interview with The Journal Gazette, an IU health official said Bauer consulted with the Indianapolis-based health care provider.

The article, published online and in print, incorrectly described Bauer as a “paid” consultant. IU Health spokeswoman Lauren Cislak said in a follow-up email that Bauer had not been paid at that point. Bauer didn't sign a contract with IU Health until Oct. 26, one day before the announcement, she said.

Among the information Bauer is alleged to have improperly shared is information about Lutheran employees, local doctors, and insurer and employment contracts. 

CHS fired Bauer in June following a failed attempt by 10 local doctors to persuade parent company CHS to sell Lutheran Health Network to an investment group approved by the doctors. CHS rejected the $2.4 billion buyout offer in May, saying it was at least $1 billion too low.

The doctors said the real reason CHS didn't want to sell is that Lutheran's network makes $200 million to $300 million in annual profit, and CHS needs to continue siphoning off that money to prop up its failing corporation. The corporation's debt is about $14 billion, according to the balance sheet CHS filed this week with the Securities and Exchange Commission.

The latest CHS financial disclosure doesn't look any brighter.

According to a third-quarter earnings report filed this week, the company lost $110 million, or 98 cents per diluted share, during the three months ended Sept. 30.

Fueling the buyout talks was the doctors' contention that CHS hadn't invested adequately in Lutheran's eight-hospital network. Although the company promised in May to invest $500 million in the Lutheran system, the doctors and their supporters haven't been satisfied.

IU Health officials said disgruntled Fort Wayne doctors were among those who contacted IU Health, asking the organization to stem the potential flight of valued Lutheran physicians.

Although Bauer was careful not to take sides publicly in the dispute that pitted providers against the parent company, CHS officials weren't – and aren't – convinced of his loyalty to them.

“Bauer has made meaningful contributions over the past several years, but current circumstances put him in an untenable position and he is unable to continue in his leadership role,” CHS said in a statement issued the day Bauer was ousted.

The lawsuit, which was filed Thursday afternoon, contends Bauer was a major player behind the buyout offer.

The filing also alleges that Bauer, “Sajin Young” and the nonprofit NICHE (or Northeast Indiana Citizens for Healthcare Excellence) “are all part of a continuing, coordinated effort” to drive CHS out of the Fort Wayne market for their personal financial gain.

The suit alleges that NICHE's founders formed the organization to undermine CHS and “to facilitate the financial gain of those conspiring with Brian Bauer.” The document also alleges that NICHE is posing as a legitimate media organization to be able to criticize CHS while taking advantage of laws that protect journalists.

NICHE is not named as a defendant in the lawsuit.

NICHE co-founder Dr. William Cast, who is retired, said Friday he doesn't feel the need to hire an attorney to represent him or the organization in response to the lawsuit.