Management company sues CCMSD

HMS claims damages for early split with hospital district


June 25, 2020

The management company that Crook County Medical Services (CCMSD) fired earlier this year is suing the district for damages. Health Management Services (HMS) claims it was given 120 days of notice as per its contract, but was then “inexplicably” dismissed without payment.

According to the complaint, filed with Crook County District Court, the five-year contract between the two entities states that payment for HMS’s services would take the form of five percent of CCMSD’s total gross operating revenues. This contract was due to come to an end on September 30, but was terminated early.

The letter sent to HMS from lawyers Hirst Applegate on April 15 provides notice of the termination and 120-day notice period and notes that, “the Board of Trustees is hopeful that HMS will agree to an earlier termination date”.

Had the notice period been followed, HMS would have continued to provide management services until August 13. However, “Inexplicably, by letter dated April 29, 2020, [CCMSD] notified [HMS] that it was unilaterally voiding the Management Services Agreement effective May 1, 2020, following a special meeting of the Board of Trustees,” says the complaint.

The complaint also claims that CCMSD, “did not articulate any grounds nor cite any contractual provisions authorizing its unilateral decision” to void the agreement.

According to the contract between the two entities, the CCMSD board must give 120 days of notice unless certain conditions are met. These include HMS defaulting on the terms of the agreement; bankruptcy or dissolution; actions that constitute fraud, willful misconduct or gross negligence; discontinued operations at CCMSD or sale of the facilities; a material breach by HMS such as misfeasance; or a failure by HMS to change the CEO within 90 days if requested by the board.

None of these reasons is mentioned in the letter sent to HMS from Hirst Applegate on April 29.

In that letter, HMS is informed that the board had voted to void the management services agreement and pay outstanding invoices from February through March totaling $132,047.57. The letter also questioned an invoice dated April 28 and asked for clarification, as well as a final accounting.

HMS claimed in a response letter that it had informed the district that the company remained “willing and able” to perform its contractual duties until the 120-day period was over – and demanded payment as usual until the August 13 deadline arrived.

However, HMS says no payment was made and no response was received.

In a civil suit filed on June 5 and assigned to Judge Michael Deegan, HMS is claiming damages in the amount of $144,422.70 – the total payment the company says it should have received during the notice period, according to the terms of the contract.

According to Kara Ellsbury, attorney for the Board of Trustees, it is not possible for CCMSD to comment on the case at this time as a response to the complaint has not yet been filed.


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