Paracelsus Healthcare Corp., which is trying to right itself financially by selling some of its hospitals, is being forced to buy a hospital from a former business partner.
Last week Dakota Medical Foundation exercised its option to require Paracelsus to buy out its 50% ownership stake in Dakota Heartland Health System in Fargo, N.D.
The system runs two acute-care hospitals in Fargo with 261 beds.
Houston-based Paracelsus inherited the joint venture partnership last year when it merged with Champion Healthcare Corp., Houston. That partnership was formed in 1994, when not-for-profit Dakota Hospital merged with for-profit Heartland Medical Center, owned by Champion.
Paracelsus didn't disclose the exact sales price for buying out the foundation's interest in the partnership but indicated it was about $67 million. Under the deal, Paracelsus has until mid-August 1998 to complete the acquisition.
Ironically, Paracelsus has been trying to divest hospitals to reverse its financial fortunes. In the second quarter ended June 30, the company lost $3 million, or 5 cents per share, compared with a loss of $5.1 million, or 17 cents per share, in the year-ago quarter.
To pull itself out of its tailspin, the company embarked on a plan to divest or close some of the 30 hospitals in its stable at the start of the year. Most of the hospitals targeted for divestiture are in California (May 5, p. 36). To date, it has sold two hospitals, closed two others and consolidated operations of two hospitals.
Dakota Heartland, however, was a moneymaker. For fiscal 1997 ended June 30, the system reported net income of $5.9 million on net revenues of $49.5 million. In a statement, Paracelsus said it was "pleased" to acquire the remaining interest in Dakota Heartland.
Meanwhile, Manfred Krukemeyer, M.D., resigned as director and chairman of Paracelsus. Krukemeyer had been a director since the company's inception in 1981 and chairman since his father, Harmut Krukemeyer-co-founder and previous chairman-died in 1994.
Earlier this year, Krukemeyer cut his salary to $250,000 a year from $1 million to help the company deal with its financial problems.
Separately, Paracelsus amended its provider agreement with PacifiCare Health Systems, Cypress, Calif., retroactive to July 1. The provider agreement is specific to PacifiCare's operations in Utah.
Under the new agreement, Paracelsus trimmed its commitment to be the exclusive provider for enrollees in the Utah HMO, formerly operated by FHP International. PacifiCare acquired Fountain Valley, Calif.-based FHP in February for $2.1 billion.
For the six months ended June 30, Paracelsus lost $10.9 million under the original FHP service contract.