The board of the tax-supported hospital system in Fort Worth, Texas, last week voted unanimously to take bids to sell or lease to an outside system.
The move would mark the second sale of a Texas public hospital this year.
Hardy Murphy Jr., chairman of Tarrant County's hospital district, known as JPS Health Network, told a standing-room-only crowd that declining revenue sources prompted the board to contemplate "what to do with the hospital."
After listening to five employees and patients of JPS speak about the need to continue John Peter Smith Hospital's mission, the 11-member board met in executive session for more than five hours. When members returned, they voted to hire Ernst & Young, a national accounting firm, to coordinate a request for proposals.
This would be the second tax-supported hospital in Texas to go on the auction block this year. Earlier, the Amarillo Hospital District sold its facility for $120 million to Universal Health Services, an investor-owned chain based in King of Prussia, Pa.
The decision by JPS' board follows a failed attempt to block the state from implementing its plan to funnel Medicaid beneficiaries into HMOs (July 8, p. 22). JPS had sued the state, but earlier this month State District Court Judge Jim Myers dissolved a temporary restraining order that had blocked implementation of Medicaid HMO pilot projects in Fort Worth and Lubbock, Texas.
The judge ruled that the pilot projects in those cities don't have to comply with a state law passed last year. That law, which would move the entire state Medicaid program into managed care, was favored by public hospitals such as JPS because it mandated that they be included in Medicaid contracting.
For the fiscal year ended Sept. 30, 1995, JPS Health Network reported an operating loss of $5.7 million. However, thanks to $10.8 million in Medicaid disproportionate-share funding for treating large numbers of poor people, along with $8.1 million of interest income, the hospital had a bottom-line gain of $13.2 million.
As at many Texas public hospitals, disproportionate-share funding has been a financial lifeline. That lifeline, however, is expected to be cut off under new funding formulas. In fact, JPS has about $72 million in disproportionate-share cash reserves. Its debt totals $41 million.
In the most recent fiscal year, the district received $102.8 million, or about half its revenues, from taxes.