Hospitals are in and managed care is out at Christus Health.
Just three days after it completed the acquisition of 160-bed Highland Hospital in Shreveport, La., from Columbia/HCA Healthcare Corp., Christus said early last week that it was putting its 95,000-enrollee HMO up for sale.
Christus co-owns the HMO, Memorial Sisters of Charity Health Network, with Houston-based Memorial Hermann Healthcare System. Memorial is selling its share in the plan as well.
The moves are part of an effort by Christus, an Irving, Texas-based Roman Catholic system, to get back to basics and stanch operating losses, which last fiscal year reached nearly $100 million.
Highland was the second of two Shreveport-area hospitals that Christus added to its initial 27-hospital roster, created in February through the merger of San Antonio-based Incarnate Word Health System and Houston-based Sisters of Charity Health Care System.
Christus also operates 486-bed Christus Schumpert Health System in Shreveport.
In June, Christus bought 168-bed Bossier Medical Center from the city of Bossier, near Shreveport, for an undisclosed sum.
But more acquisitions in the near future are unlikely.
"We need to concentrate on core competencies," said Christus President and Chief Executive Officer Thomas Royer, M.D. Royer took the helm of the new system last month.
"We're not going to create more debt and more capital expenditures until we're sure the operating income can support it," he said.
Christus now owns three of the nine hospitals in the Shreveport-Bossier market, representing 38% of 2,100 acute-care beds there.
Royer said Christus now has enough critical mass there to compete effectively. Its chief competitor is Willis-Knighton Bossier Health System, which operates four other hospitals with a total of 820 beds.
In a report earlier this year, Moody's cited losses at Christus Schumpert, which was previously profitable, as a key factor in the system's operating losses.
Christus will complete projects currently under way, including the construction of a new 60-bed hospital, due to open next year in the Houston suburb of Katy, and an outpatient clinic in Shreveport.
But the short-term priority is on cementing the integration of the two systems and creating "fiscal stability," Royer said.
The system has been dipping into its investment income to offset operating losses. This year's budget calls for a $30 million profit, but Royer said a budget-review process now under way may ratchet down those rosy expectations.
Selling its share in the HMO lets management concentrate on its core hospital business, Royer said. It also may help stem some losses to the system.
A report filed with the state earlier this year showed the HMO had a $10.6 million net loss on $164 million in premium revenues in 1998. But an amended report, filed Sept. 13, showed a $1 million profit last year on the same revenues.
According to the plan's spokeswoman, Lesa Sorrentino, "very conservative reporting of numbers" had led to the initial report of losses last year. Numbers were revised to reflect lower reserves. Sorrentino said the HMO expects a profit again this year despite reported losses of $740,000 as of June 30.
The decision to sell the 4-year-old health plan may also reflect increasing competition between Christus and Memorial Hermann.
Their health plan joint venture was founded in 1995 by what was then Memorial Health System and Sisters of Charity Health System, both of Houston. Expansion within the two systems since then has strained the partnership. Memorial merged with Hermann Hospital in 1997 and later acquired several other area hospitals. And the Sisters' merger that formed the five-state Christus system in February doubled that system's size and moved its headquarters across Texas to the Dallas area.
This month, Memorial Hermann bought two hospitals in Beaumont, Texas, and nearby Silsbee, Texas, from Triad Hospitals, a Columbia spinoff. Christus had planned to buy those same hospitals earlier this year but called off the purchase in the face of community opposition.
Beyond selling the HMO, Royer said he has no plans to dispose of other major lines of business but added that all options are open.