Kosair for Web*304Louisville may not be a regional medical center like Nashville, but it is a candidate for having the most litigious nonprofit public charities and nonprofit healthcare systems in America.

In another round of health-care suits, Kosair Charities is suing Norton Healthcare, the Louisville-based hospital system that manages and staffs Kosair Children’s Hospital.

Norton also is involved in a suit related to Kosair Children’s Hospital downtown with both the University of Louisville and the state of Kentucky.

As we reported in The Closing Bell this morning, Kosair Charities executives are charging their Norton counterparts with funneling millions of dollars from the charity into its general fund, then refusing to account for how those funds – meant solely to aide Kosair pediatric patients – is being spent.

But as always in the healthcare space, insiders tell us there are myriad and assorted behind-the-scenes machinations feeding the frenzy.

In a news conference today at Kosair Charities, attorney Donald Cox, with Louisville-based firm Lynch, Cox, Gilman and Goodman, said his client’s concerns are transparency, accountability, and care. Kosair Charities officials claim they asked for greater transparency about where their donations are going, only to be told it was “a deal breaker by the hospital we helped fund,” Cox said.

Kosair Charities has donated more than $114 million to Kosair Children’s Hospital, and $37 million since a 2006 Restated Agreement of Affiliation. Kosair Charities is asking Jefferson Fiscal Court to rule on whether the charity can terminate that agreement and supplemental agreements with Norton.

Cox called the complaint, filed yesterday in Jefferson Circuit Court, “a last resort” after months of negotiation with Norton officials. In the complaint, Kosair charges Norton was “unjustly enriched by its use of charitable funds contributed by Kosair.”

Though he was vague about when and why the relationship with Norton changed, Cox said when Kosair Charities asked for financial details about how its donations were spent, Norton executives balked.

That revenue includes two years of operating surpluses at Kosair, money Kosair officials believe is co-mingled in Norton’s general operating fund, Cox said.

Norton executives essentially said, “‘Where do you want us to tell you the money is going?'” Cox said. Kosair Charities is asking for granularity down to cost information on each patient treated. What remains unclear is what are traditional and reasonable accounting practices, and whether rigid separation of funds is possible with tens of millions of dollars.

For example, our sources say U of L was once required to report in that sort of micro detail for reimbursements related to the Quality Care Charity Trust Fund for indigent care, but now reports more macro trends.

Cox emphasized the funding dispute has not impinged on the quality of care, but has kept Kosair from advancing into the top ranks of national pediatric facilities: “We want to see Kosair become a top-ranked children’s hospital.”

Norton officials declined an interview, but in emailed statements charge that it’s Kosair Charities, not their system, that is the source of the kerfuffle.

“It is preposterous for Kosair Charities to suggest they do not know where their contributions go or how they are used. In fact, Kosair Charities gets to designate specifically how a significant part of their dollars are spent using a menu of options we provide to them.

The remainder is spent in accordance with the terms of the agreement. Kosair Charities agreed to make annual support payments to Norton Healthcare, which in turn is required to use the money at Kosair Children’s Hospital or in association with its delivery of pediatric health care services in a manner supportive of the mission of the hospital.

That mission includes using Kosair donations for capital improvements at Kosair, including a $70 million renovation and $60 million in unpaid bills for Medicaid and indigent patients, according to the statement.

No one is turned away from Kosair.

“Our method of distributing funds from Kosair Charities has been consistent since day one and that has always been to their satisfaction until now,” Norton officials stated.

They counter-charge Kosair Charities began withholding its contractually obligated funding of the hospital last year and is now more than $6 million behind in payments “while continuing to advertise and take credit for its current and future contributions to Kosair Children’s Hospital,” according to their statement.

Cox acknowledged Kosair Charities has put that contribution in escrow until the suit is settled.

But the sides clearly are far apart, with Kosair Charities executives claiming Norton is out of compliance with an agreement that dates back to 1981, and Norton officials claiming the charity has engaged in “a continuing systematic pattern of raising baseless allegations in an effort to avoid its contractual obligations to the children’s hospital that carries its name.”

From the Norton statement:

Kosair Charities has recently made substantial demands, which would mean significant revisions to the current agreement and relationship. While we have worked hard to accommodate its requests that we determined  to be reasonable, most of Kosair Charities’ demands were not consistent with the parties’ written agreement that has been in place since 1981. Many of its requests were outlandish and clearly not in the best interests of Kosair Children’s Hospital or the patients it serves.

All this, of course, is not happening in a vacuum. Kosair Charities and Norton are on some level rivals since both have extensive fundraising efforts.

Late last year, Norton and the University of Louisville went to court to settle who controls Kosair Children’s Hospital downtown, which includes lucrative pediatric practices. Both Norton and U of L doctors practice at Kosair.

(Norton also operates Kosair Children’s Medical Center – Brownsboro and Norton Women’s and Kosair Children’s Hospital in the DuPont medical complex.)

U of L executives led by Dr. David Dunn, executive vice president of Health Affairs, argued that Norton’s agreement with University of Kentucky to co-manage Kosair and Kentucky Children’s Hospital in Lexington violates a state lease stipulation the downtown Kosair be operated in the interests of U of L and its medical school.

The state owns the land under the hospital at Floyd and Chestnut streets, and U of L threatened to evict Norton doctors from the facility.

Last February, Franklin County Circuit Court Judge Thomas Wingate ordered the University of Louisville and Norton Healthcare to enter mediation.

In conversation with insiders Thursday night and Friday, the question is, where does U of L fit into the dispute between Kosair Charities and U of L’s arch-rival, Norton?

More as we know more.