At a time when Columbia/HCA Healthcare Corp. can't unravel its physician syndications quickly enough, other hospital companies are using them as part of their acquisition strategy.
On Feb. 20, Scottsdale, Ariz.-based Doctors Community Healthcare Corp. made the latest announcement of a physician syndication. It said it and a group of about 600 local physicians would be purchasing 523-bed Michael Reese Hospital and Medical Center and 213-bed Grant Hospital, both in Chicago, for an undisclosed sum from Nashville-based Columbia.
At the same time, the nation's largest healthcare company is trying to unravel its physician investor groups, which have allowed physicians to hold an ownership interest in an individual hospital or in all the Columbia hospitals in a market.
Columbia announced the change in strategy in August 1997 as part of its response to the nationwide federal probe into its billing practices.
Some 3,000 of the 90,000 physicians that admit patients to Columbia hospitals were part of 45 syndication deals with the company. Currently about half those physicians have pulled out or have promised to pull out of seven of the syndicates, said spokesman Jeff Prescott.
"We just want to not have any relationships with physicians that could even be perceived as inappropriate," Prescott says.
Physician syndications are risky because they may create an improper financial incentive for physicians to refer patients to the hospital in which they have an ownership interest.
Recently proposed HCFA regulations implementing the 1993 "Stark II" law on physician self-referrals would allow doctors to invest in whole hospitals, as long as they have admitting privileges. However, doctors couldn't have an ownership interest in specific hospital-owned services such as home care. Any referrals to such facilities could constitute a violation of the federal anti-kickback laws, which bar any form of remuneration to induce Medicare or Medicaid patient referrals based on volume or value of the referrals (Jan. 12, p. 6).
Meanwhile, Oklahoma City-based Integris Health is joining Doctors Community in its pursuit of physician ownership deals. Last month it announced an agreement to lease 75-bed Bethany (Okla.) Hospital from the city for 25 years; it intends to run the hospital through a new limited liability company owned in part by Bethany staff physicians (Feb. 9, p. 8).
Another newly launched hospital company, Houston-based HealthPlus Corp., intends to create limited partnerships in which physicians hold a minority interest in the hospitals HealthPlus acquires. One of its facilities is 80-bed Normandy Community Hospital in St. Louis, which it owns with 30 local physicians (Feb. 16, p. 48).
Doctors Community Chairman Paul Tuft says the strategy has worked for his company in other locales and is a way for physicians to contribute to the hospital's healthcare delivery strategy.
In the Chicago deal, "physicians were really looking for a way to assert themselves and put their ideas of how healthcare should be provided into action," Tuft says.
Jeff Peters, president of healthcare consulting firm Health Directions, says hospital systems are becoming more attracted to physician investor groups because they lock in referral patterns. More often than not, the hospital company isn't desperate for the physicians' financial investment. "The doctors are not contributing a major portion of capital," he says, adding that hospital companies are "trying to find a way to lock in the doctors to get their business."
Two of Brentwood, Tenn.-based Quorum Health Group's 19 hospitals have physician investors: 197-bed Parkview Regional Medical Center in Vicksburg, Miss., and 197-bed Mary Black Memorial Hospital in Spartanburg, S.C.
Parkview was Quorum's first acquisition in 1990, according to company spokeswoman Shea Davis. Like Parkview, the Mary Black syndication was done because it made sense in that particular market, Davis says.
"They've worked for the communities to strengthen the health system there," she says. "They've been able to add services and more physicians."
While Davis would not disclose the physician-ownership stake, she did say that Quorum is the majority owner, which is typical of most physician ownership deals.
HealthPlus Chief Financial Officer Mac Burt says physician groups need to be structured carefully but often can add to the quality of care at a hospital.
"We believe that integrating physicians really enhances patient care," he said.