Launching its first foray into the acquisition of nonurban or rural hospitals, Parkside Management Services of Park Ridge, Ill., and a group of 15 physicians have purchased 69-bed Highland Hospital in Belvidere, Ill.
Parkside owns 40% of Independent Physicians Associates, a for-profit joint venture created with the Belvidere-based physicians, who own the remaining 60% of the firm. A purchase price was not disclosed.
"We'll probably try to expand in the area of ownership and management of other rural hospitals," said Michael McCarthy, chairman and equity owner of Parkside Management Services, an affiliate of Parkside Co., also in Park Ridge.
IPA purchased the outstanding debt of Highland, which now will be run as an investor-owned facility. Highland had been managed for 14 years by SwedishAmerican Hospital, a 298-bed, not-for-profit facility in nearby Rockford, Ill.
"The money (from the sale) went to SwedishAmerican because Highland owed SwedishAmerican a significant amount of money," McCarthy said. "The debt Highland had was extinguished."
Executives said Highland had been reeling financially for the past several years. Highland lost $320,000 on $6.4 million in net revenues in 1994, the most recent year for which financial figures were available from HCIA, a Baltimore-based healthcare research company. Highland had $4.7 million in assets in 1994.
Parkside Management Services is owned jointly by McCarthy and his brother James, the firm's president, and will provide management services to Highland. The company has contracts with 35 senior housing facilities and chemical dependency facilities in 16 states.
"These local physicians have been committed to Highland Hospital and the citizens of the Belvidere area for a number of years," said Greg Olson, administrator at Highland Hospital.
Parkside Management Services invested $1.1 million in Highland in March when the firm took over the operations. State regulators approved the deal, and the license was transferred to IPA on April 23, executives said.
"We plan to remain independent and work with area hospitals through referrals," Michael McCarthy said.
Until earlier this year, Michael McCarthy owned Parkside Behavioral Services, another affiliate of Parkside Co., which merged with Englewood, Colo.-based Specialty Healthcare Management earlier this year. (April 8, p. 18).
MODERN HEALTHCARE's 1995 Contract Management Survey ranked both companies among the top five psychiatric services contractors for 1994. Their combined 1995 revenues were projected to be more than $50 million. Michael McCarthy remains a shareholder and director on Specialty's board.