St. Francis HUD/OIG Media StatementFINAL 9.4.15

September 4, 2015

Statement Regarding HUD Audit Report on St. Francis

Columbus, GA – The following is a statement by St. Francis Hospital regarding report received today from the Office of the Inspector General for the U.S. Department of Housing and Urban Development (HUD) regarding an audit of HUD’s loan to St. Francis Hospital.

In 2011, St. Francis Hospital broke ground on a $252 million expansion and renovation project that nearly doubled the size of its facility. This project was funded, in part, by a $239 million construction loan insured by the U.S. Department of Housing and Urban Development (HUD). The expansion and renovation funded by this loan helped St. Francis provide care for thousands more patients in the last 3 years.

In January 2015, HUD initiated an audit to review St. Francis’ compliance with its regulatory agreement for the loan.

What the HUD audit reports in its finding is that the hospital submitted inaccurate financial information, improperly disbursed mortgage proceeds, incurred unauthorized liability and subjected mortgage funds to bank sweeps. According to the report, this occurred because hospital management at the time did not implement adequate controls and lacked policies and procedures to ensure the loan was used according to the regulatory agreement. Additionally, the report states that some members of the hospital Board of Trustees had potential conflicts of interest through association with a bank which provided St. Francis with a line of credit.

Importantly, what the audit did not find was any issue with clinical care or the quality of patient care services.

Many of the issues identified in this report had already been identified by St. Francis through our own voluntary review of our financial processes and related procedures. Moving forward, we will continue to be focused on ensuring that the recommendations of HUD reviewers are successfully implemented. We have already begun to address many of these recommendations.

First, the current St. Francis management team is working proactively to strengthen financial and accounting protocols, processes and procedures. One key to the success is the potential partnership with LifePoint Health, which has its own best practice processes, as well as the ability to provide St. Francis with the long-term financial stability and the access to capital that our hospital requires. LifePoint’s expertise in managing complex financial and regulatory requirements will help us ensure compliance and allow us to maintain our focus on what we do best – providing high quality care to the communities we serve.

Second, we believe strongly that our volunteer Board of Trustees acted then and now in the best interest of our hospital and for healthcare in our community. Although a few of our Board members have held simultaneous positions on the boards of St. Francis Hospital and local banks, none of them ever participated in or benefited from the loans at issue in the audit. However, we can understand the perception of the conflict by HUD and will review and revise our governing rules that are already in place to avoid potential conflicts of interest, as necessary.

St. Francis HUD/OIG Media StatementFINAL 9.4.15

Lastly, we announced earlier this week to our associates and physicians the formation of an Accountability Task Force. The task force will review and evaluate some of our operations and communications processes and report directly to the Board. The task force will continue to look for opportunities to share information as it becomes available.

We are confident in the excellent care we continue to provide to our patients. For the last 65 years, St. Francis Hospital has been a leading provider of high quality healthcare in the Columbus region, and we remain optimistic about the future of healthcare in Columbus and the proposed strategic partnership with LifePoint.

# # #