Attorney general files suit against Allina

MINNEAPOLIS (AP) -- Minnesota Attorney General Mike Hatch filed a lawsuit accusing Allina Health System of spending millions of dollars on such items as golfing trips, spas, image consultants and other items and asking the company to hand over thousands of financial documents.

Hatch said his review of the nonprofit health care company found questionable multimillion dollar life insurance policies, payment of executive bonuses even when financial goals weren' t met and massive consulting contracts, the Star Tribune of Minneapolis reported Wednesday.

The attorney general and an outside auditor whom he hired to lead the investigation estimate that as much as 47 percent of the health insurance premiums paid to Medica, Allina' s HMO, have been spent on Allina' s administration rather than on medical care for its members -- far more than the 10 percent Medica has reported.

The administrative costs and the perks, although not necessarily illegal, raise questions of possible mismanagement and whether Medica premiums are higher than they need to be, Hatch said.

Hatch' s findings, contained in a memorandum that he filed in Hennepin County District Court, signal an escalation in his ongoing battle to disclose how the state' s nonprofit health care companies spend their members' premium dollars.

Gordon Sprenger, Allina' s chief executive officer, said Hatch is inaccurate in some accusations and is being unreasonable in his demands on the company.

" As we look through his innuendoes there are many errors in there, " Sprenger said. " We think this has gotten way out of control. Now is the time to have a third party supervise this whole process."

Sprenger said that audits conducted by the IRS and the Minnesota Departments of Commerce and Health have consistently shown that Allina lives by the rules that govern it.

Hatch said that after examining Allina -- the state' s biggest health care system with 1 million health plan members -- he plans to conduct similar reviews of the state' s two other large health plans, HealthPartners and Blue Cross and Blue Shield of Minnesota.

The court memorandum seeks to force Allina to turn over tens of thousands of documents to his office. Among the expenditures Hatch questioned in his memorandum:

$16, 655 for golf for 11 Medica employees and seven of their spouses at LaQuinta Resort and Club in California. That three-day sales meeting included a $2, 400 expenditure for a " Mystery Canyon Jeep tour" and $1, 700 in spa charges.

$10, 000 for a laser light show at a company party.

$2, 500 for a 14-member orchestra at a retreat at a Radisson resort in Alexandria.

Sprenger said many of the trips and golf outings were incentives for sales staff.

" Sales incentives are what drives them, " he said. " If they outcompete, outsell their colleagues, you reward them."

While Hatch said that these expenditures are improper for a nonprofit health care organization, he said even more disturbing is how Allina accounts for its spending. He alleged that Allina hides administrative costs by improperly accounting for them as patient treatment costs.

Jim Korin, an outside accountant hired by Hatch to direct a team of auditors working in Allina' s Minnetonka headquarters, called Allina' s expense reporting " a shell game."

The Allina perks uncovered by Hatch have angered some Allina doctors who have long complained that they are paid late and have to do without vital medical equipment.

Dr. Mary Dunn, neurosurgeon and chief of medical staff at Allina' s United Hospital in St. Paul, said Wednesday that if the allegations are true, " Allina' s executives have lost sight of their mission of providing health care in this community."

Hatch said he that when he' s satisfied auditors have a detailed accounting of Allina' s finances, he will take his findings to Allina' s board of directors with recommendations.

If there is proof of mismanagement, he hopes the board will institute reforms, he said.

If the board chooses not to or is unsuccessful, then regulators from his office, the Health and Commerce departments would have to decide whether the board should be replaced, he said.

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