House Speaker Newt Gingrich (R-Ga.) last week called for hearings examining the managed-care industry. Speaking to physicians attending a Washington legislative conference sponsored by the American Medical Association, which has accused managed-care plans of manipulating markets for their own financial gain, Gingrich said, "Anytime you have an accumulation of power comparable to some of the communities in which managed care has a very large penetration, you need to have some kind of government review." Managed-care industry officials said they welcome such hearings.
Healthtrust sold one of its two "stone" companies last week, after Atlanta-based nursing home chain GranCare agreed to buy Healthtrust-owned Cornerstone Health Management for an undisclosed amount. Dallas-based Cornerstone provides subacute-care contract management services to more than 100 hospitals in 20 states. In 1994, the company posted revenues of $37 million, compared with $4.3 million in 1992. The deal is expected to be completed within the next month. Earlier this year, Healthtrust officials said the company was negotiating the sale of two of its contract management subsidiaries as part of its pending $5.6 billion merger with Columbia/HCA Healthcare Corp. (Jan. 30, p. 4). The other company, MileStone Healthcare, has not been purchased to date.
Methodist Hospital in Houston, which traditionally shunned HMOs, has entered its first HMO contract. Texas' largest hospital signed a contract with Cigna HealthCare in which it will be the anchor provider for a new HMO product. The product, called Cigna Select, will be marketed to small and medium-sized employers, beginning next month.
OrNda HealthCorp, Nashville, Tenn., reported a 520% increase in profits for its second quarter ended Feb. 28. The chain of 47 hospitals in 14 states reported net income of $19.9 million, or 43 cents per share, compared with net income of $3.2 million, or 7 cents per share, in the year-ago period. Revenues rose 56% to $442.7 million. For the six-month period, OrNda reported a 540% increase in net income to $33.3 million, or 72 cents per share, compared with $5.2 million, or 12 cents per share, in the year-ago period. Revenues grew 56% to $860.7 million.
Community Psychiatric Centers reported an 849% increase in profits for its first quarter ended Feb. 28 to $5.9 million, or 14 cents per share, compared with net income of $625,000, or 1 cent per share, in the year-ago period. Revenues rose 30% to $120.4 million. Las Vegas-based CPC operated 47 psychiatric hospitals and 13 subacute-care hospitals during the quarter. It recently opened two new hospitals.
Diversified Pharmaceutical Services, a subsidiary of drugmaker SmithKline Beecham, last week entered into an agreement with Coastal Healthcare Group to manage the pharmacy benefit programs of Coastal's health plans. The deal is the latest example of groundbreaking affiliations between providers and manufacturers. In addition, SmithKline's laboratory chain will become a preferred provider to Coastal. Durham, N.C.-based Coastal manages physician practices and hospital emergency rooms. SmithKline is a London-based drug manufacturer with U.S. headquarters in Philadelphia.
Two key House members are sending signals that Congress soon will consider easing the Clinical Laboratory Improvement Act's regulation of physician office labs. Rep. Thomas Bliley (R-Va.), chairman of the House Commerce Committee, told physicians attending an American Medical Association conference in Washington last week that simple tests performed in physicians' offices should be exempted from the CLIA regulations. Meanwhile, Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee, told members of the Texas Medical Association that he was on the verge of reintroducing his bill that would create the same exemptions.