The Texas attorney general's office vows that if Hermann Hospital in Houston merges with a healthcare system in that city, the state will insist the once-scandal-ridden hospital stick to its charitable mission.
The office confirmed Houston-based Memorial Healthcare System and 655-bed Hermann are discussing a merger. A Hermann-Memorial deal would create the area's largest not-for-profit system and allow Memorial to dent the armor of Columbia/HCA Healthcare Corp., which has 17 hospitals in the area.
"We have some past agreements with Hermann regarding providing charity care, and those agreements would have to be incorporated into a proposed settlement," said Ward Tisdale, spokesman for Texas Attorney General Dan Morales.
Hermann was rocked by scandal in the mid-1980s when a former trustee and two former hospital administrators were indicted on charges of financial wrongdoing at Hermann Hospital Estate, a $400 million trust fund that administered and financed the hospital. Hermann has since engineered a financial turnaround and was included last year in a listing of the nation's top 100 hospitals (Dec. 9, 1996, p. 52).
As part of oversight agreements with state authorities, the attorney general's office has to approve any deal involving Hermann.
Memorial played down the Hermann discussions, saying it's the system's latest effort to link with one of three hospitals located in the prestigious Texas Medical Center. "We're talking to Hermann, but we're talking to lots of people," said Caroline Osman, spokeswoman for Memorial.
Memorial owns six hospitals and has a contract to manage another hospital in the Houston area. The system posted net income of $30 million on net revenues of $531.9 million in 1996. It had $683.9 million in assets.
Hermann reported net income of $54.5 million on net revenues of $418.3 million in 1995, the latest year for which financial data were available from HCIA, a Baltimore-based healthcare information company. Despite a profit margin that year of 13.2%, acute-care admissions dropped 11% to 26,784 in 1995 from 30,252 in 1994.