Fearing the loss of its tax-exempt status, Tulane University quietly nixed a plan by Columbia/HCA Healthcare Corp. to allow physicians affiliated with the university and its hospital to invest in the chain's hospitals and ancillary businesses in New Orleans.
John La Rosa, M.D., chancellor of Tulane University Hospital and Clinics in New Orleans, confirmed the altered plans last week.
"It never came to fruition," La Rosa said. "There was never an offer made. The university's not-for-profit status would be at stake if that happened."
La Rosa's disclosure came the same week the Internal Revenue Service issued new guidelines on the tax implications of physician recruitment incentives offered by not-for-profit hospitals. Under the guidelines, the only sure way for a hospital to lose its exemption would be if the incentives also violated the kickback provisions of Medicare and Medicaid fraud-and-abuse statutes (See story, p. 2).
In 1995, Columbia paid $132 million for an 80% interest in Tulane University Hospital and Clinics.
In what was Columbia's first venture with a major academic medical center, Tulane's hospital became for-profit, but the 300 physicians remained faculty employees of not-for-profit Tulane University.
In other physician investment arrangements with Columbia, the doctors typically have their own practices and aren't employees of the university or hospital.
Language in Columbia's contract with Tulane permitted a syndication, which would allow doctors the opportunity to invest in a Columbia subsidiary that runs the hospital and the chain's other hospitals and properties in New Orleans (Oct. 21, 1996, p. 78).
Columbia's physician-ownership strategy has been controversial. It made its first such arrangements in El Paso, Texas, where federal agents raided the company's operations on March 19.
HCFA and HHS' inspector general's office have been under congressional pressure to investigate whether Columbia's physician-ownership strategy violates federal kickback statutes. The statutes bar any form of remuneration to induce Medicare or Medicaid patient referrals.
La Rosa said any Tulane syndication would be "subject to our being assured that our not-for-profit status wouldn't be jeopardized. We never got a formal proposal, and we never acted on a proposal."
Tulane physicians last October said they hadn't seen a formal offer from Columbia, but the company was considering offering a syndication deal in late 1996 and earlier this year.
If Tulane physicians were to take Columbia up on its offer, La Rosa said it would face internal legal reviews as well as an in-depth IRS examination. "My guess is we would have an IRS ruling before we would proceed," La Rosa said.
Steven Pickett, administrator and chief operating officer of Tulane's hospital and clinics, had no comment.