In a bold attempt to reclaim control of their work environments, a group of Chicago-area doctors are purchasing the hospitals where they work.
Last month physicians at Michael Reese Hospital and Medical Center and Grant Hospital signed a definitive agreement to buy the assets of the two Chicago facilities from Nashville, Tenn.-based Columbia/HCA Healthcare Corp. They expect to complete the deal by mid-October.
Physicians have purchased other hospitals around the country but none of this size.
Late last year, Columbia announced it was selling Michael Reese, an 845-bed tertiary-care teaching hospital on Chicago's South Side, and Grant, a 445-bed community, acute-care hospital on the city's North Side, as part of a massive corporate restructuring.
Both hospitals have struggled financially in recent years. In 1996 Michael Reese had net revenues of $182.5 million and a pretax loss of $23.4 million, and Grant had $60.5 in net revenues and a pretax loss of $1.5 million, according toCrain's Chicago Business, a sister publication of Modern Physician.
Purchase efforts were led by the Reese-Grant Acquisition Group, which represents about 600 physicians on the hospitals' medical staffs. This winter, the physicians brought in partner Doctors Community Healthcare Corp., a Scottsdale, Ariz.-based for-profit healthcare management company. DCHC will provide the majority of the $60 million purchase price through accounts receivable financing and the sale of stock to physicians and employees.
Enrique Beckmann, M.D., Michael Reese pathologist and RGAG president, expects 200 to 300 physicians to invest between $10,000 and $30,000 apiece.
Although local physicians will own just 20% of the hospitals' assets, they will hold the majority of seats on a new board of directors that will oversee the two facilities. DCHC will have the power to override major expenditures, but DCHC Chairman Paul Tuft says the new hospitals will provide a "physician-directed approach to healthcare."
Beckmann says that approach will include developing new relationships with primary-care providers, establishing more hospital-affiliated ambulatory clinics, bringing in additional high-quality nurses, remodeling parts of the hospitals to increase efficiency and greatly expanding community outreach efforts.
"By involving physicians directly in the management of the hospital, we firmly believe we're going to have a much more responsible institution that will be much more patient- and physician-friendly," Beckmann says.
Beckmann and Tuft are confident the hospitals' new focus on community relations will help overcome problems.
"Michael Reese is a well-kept secret, and we have really excellent programs that have been absolutely not marketed for the last eight to 10 years," Beckmann says.
Both hospitals will perform extensive assessments to identify community needs, Beckmann says. He points to Michael Reese's new asthma education efforts as an example.
While many doctors are unhappy with their work situations, buying a hospital isn't an option for most medical staffs, Beckmann says. The key to the RGAG's success was its cohesiveness and camaraderie before the purchase.
"We were already a cohesive medical group, an organized medical group that had faced Columbia on a variety of issues. That gave us some degree of certainty that we would be able to meet this challenge as well," he says.
David Wasserman, M.D., Grant's medical staff president, predicts it will take a few years for the hospitals to start seeing the positive results of physician ownership. "There are going to be growing pains because we don't have any template to model ourselves after."