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DMC to Pay $30M to Settle False Claims, Kickback Charges

The government learned of the statutory violations from DMC, which discovered improper financial relationships with a number of physicians as it prepared for the sale to Vanguard. "We applaud the hospital leadership’s decision to come forward voluntarily to disclose these issues to the government," said Barbara McQuade, U.S. Attorney for the Eastern District of Michigan.

Vanguard and DMC said the settlement will not delay the deal, which was announced earlier this year and is set to be finalized Friday. They said the transaction has received all city, county, state, and federal reviews and no further approvals are required.

The transaction was put on hold in October when the DMC board voted to delay until the end of the year what was described as a $417 million purchase agreement with Vanguard. The delay was attributed to the complexity and size of the transaction, but neither company detailed specific reasons.

Under terms of the final purchase agreement, Vanguard will acquire the assets of DMC for $365 million in cash based on a formula set out in the agreements defining the assets and liabilities of the DMC. Vanguard will assume all of DMC’s liabilities other than outstanding bonds and similar debt. Vanguard will keep all of DMC’s hospitals open for at least 10 years, to invest an estimated $350 million for routine capital improvement and an additional $500 million on specific capital projects during the first five years of ownership.

Vanguard has also agreed to assume the liability for the defined-benefit pension plan for DMC retirees and to keep in place a policy for charity, indigent and uncompensated care that is at least equivalent to the DMC's current policy. Vanguard said it will assume DMC's existing provider agreements with government and private payers.

DMC operates 10 hospitals and institutes, including Children's Hospital of Michigan, Detroit Receiving Hospital, Harper University Hospital, Huron Valley-Sinai Hospital, Hutzel Women's Hospital, Kresge Eye Institute, Rehabilitation Institute of Michigan, Sinai-Grace Hospital, DMC Surgery Hospital, and DMC Cardiovascular Institute.

Vanguard owns and operates 18 acute care hospitals and complementary facilities and services in five states.

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