A small not-for-profit hospital in St. Croix Falls, Wis., has become the target of Wisconsin's broad new hospital sales law.
The twist is, 69-bed St. Croix Valley Memorial Hospital isn't being sold. It's buying. And it's buying a clinic.
The hospital wants to buy the assets of River Valley Medical Center, a for-profit, 20-physician multispecialty group clinic attached to the hospital.
The proposed acquisition has triggered a state review because the deal allows the physicians to appoint four of the nine seats on the hospital's governing board.
Under the statute, allowing a for-profit organization to appoint 20% of a hospital's board of directors sends up a red flag, even if the not-for-profit hospital doesn't change hands, because it ostensibly changes control of the hospital.
The law, which went into effect in April, was drafted broadly, said Tim Hartin, general counsel for the Wisconsin Health and Hospital Association. "You can't pass legislation without generating lots and lots of unintended consequences."
Wisconsin was at least the 30th state in recent years to pass a law requiring public disclosure or state approval of not-for-profit hospital sales.
In Wisconsin, the purchase or lease of a not-for-profit hospital by a for-profit company or a significant change in control of the not-for-profit requires approval from the state attorney general, the commissioner of insurance and the Department of Health and Family Services. A public hearing also is required (April 27, p. 21).
St. Croix Valley Memorial has provided the state attorney general with an outline of its deal to acquire the physicians' clinic, and a public hearing was held Oct. 1, said Steve Urosevich, the hospital's president and chief executive officer. "I think it's good that the state has established some responsibilities for oversight in the sale and acquisition of healthcare facilities," he said.
Neither the hospital nor the clinic would disclose the sale price. A spokesman for Wisconsin's attorney general did not return calls for comment. The deal, pending final state approval, is expected to be completed early next year, said Cindy Lundmark, River Valley's administrator.
Although the hospital will acquire the clinic's assets, the physicians won't become hospital employees. Instead, they will contract with the hospital to provide services. The hospital will pay about $60,000 in annual property taxes on the clinic, Urosevich said.
St. Croix Valley had net income of about $22,000 on total revenues of $16.4 million in 1996, according to the American Hospital Directory, a Louisville, Ky.-based healthcare information company.