A not-for-profit and for-profit system are engaged in a game of role reversal in Bethany, Okla., where control of a hospital is changing hands.
The facility is Bethany Hospital, a 75-bed city-owned not-for-profit.
Last week, Integris Health, a not-for-profit system based in Oklahoma City, entered an agreement to lease the hospital from the city for 25 years. The city of Bethany currently receives lease payments of $25,000 per month, but that amount will be renegotiated, a city official said.
When the new lease takes effect April 1, Integris will assume management control of Bethany from Nashville-based Columbia/HCA Healthcare Corp. Columbia has managed the hospital under contract with the city for the past three years.
Columbia, which is downsizing itself in the face of a massive federal fraud investigation, has been getting out of the physician syndication business as part of its restructuring.
Integris is getting into it.
The system, which operates 17 hospitals, intends to run Bethany through a new limited liability company owned in part by Bethany staff physicians.
"We were looking at a variety of ways to try and align incentives, particularly on the cost side, with physicians," said Integris President Stanley Hupfeld.
Between 30 and 40 of Bethany's nearly 50 physicians have indicated an interest in the investment, Hupfeld said, adding that he expects the physicians to own up to 40% of the limited liability company. The minimum and maximum investment levels for the physicians have not been set.
Hupfeld said Integris is aware of the concerns surrounding physician syndications but that the company plans to be very cautious in implementing the strategy.
"We think that properly done, (physician syndications) can add a lot to management and public benefit to control costs," Hupfeld said. Bethany would be Integris' first syndication.
Physician syndications are risky legally and ethically because they may create an improper financial incentive for physicians to refer patients to a hospital in which they have an ownership stake.
Recently proposed federal regulations would allow physicians to invest in whole hospitals but not specific hospital services (Jan. 12, p. 6).
Columbia is getting out of the physician syndication business because of the legal cloud surrounding such deals.
Columbia spokesman Jeff Prescott said the chain didn't try to renew the management contract with Bethany, saying it was "strictly a business-oriented decision."
According to the latest figures available from HCIA, a Baltimore-based healthcare information company, Bethany lost $1.2 million on $14.4 million in net patient revenues in 1995.