The year-old Rockwall Hospital Corp. has mailed 30 proposals to local physicians, fishing for investors in its planned 20-bed, short-stay hospital in Rockwall, Texas, about 25 miles northeast of Dallas.
The project is the latest attempt by doctors to gain control of healthcare delivery by building their own facilities.
The $15 million Physicians Medical Center at Rockwall would be the first of as many as eight physician-owned facilities in the Dallas-Fort Worth area, said Mark Kennedy, president and chief executive officer of Rockwall Hospital Corp., which is based in Garland, Texas, 10 miles from Rockwall.
Potential investor John McConnell, an orthopedic surgeon from neighboring Greenville, said there is room for competition with existing hospitals in the rapidly growing region and that a new, physician-owned hospital would help force doctors to improve quality and service.
But 20 minutes away at Lake Pointe Medical Center in Rowlett, a 92-bed hospital owned by Tenet Healthcare Corp., some are skeptical that doctors will buy into a stand-alone facility.
"With the margins that we practice with today, unless you are able to generate a substantial volume, you're not going to be able to sustain your fixed costs," said Tom Sudela, M.D., a Lake Pointe surgeon who specializes in OB/GYN procedures. "I'm not aware of doctors in this area who have the volume to make this hospital a reasonable financial endeavor."
Lake Pointe is in the midst of its own $15 million expansion. A separate medical office building also is in the works.
Still, Kennedy said he is confident his model can address the need for cost-efficient outpatient services and two- to three-day hospital stays while satisfying doctors who want more autonomy.
"The real reason to do it is it gives the physician a say and an incentive to exercise good, prudent judgment and to avoid waste and inefficiency," McConnell said.
The planned 40,000-square-foot hospital would be a limited partnership managed by Rockwall Hospital Corp. Fifty to 60 admitting physicians would own up to 40% of 120 units worth $35,000 each. Local investors, including nonadmitting doctors, would own 35%; the hospital company would own the remaining 25%. Kennedy said this ratio would ensure physician investors a safe harbor from anti-kickback violations.
Like Sudela, Lake Pointe CEO Ken Teel and Chief of Medicine Ken Bray, D.O., said they do not know of any doctors involved in the Rockwall project.
Kennedy said neither volume nor investors will be a problem because of the region's rapid growth. Some medical staffs may not know about the project because he's playing by the rules, he said.
"I'm not going through the medical staff rosters and calling doctors. I can't do that," Kennedy said. "But there are upward of 1,000 physicians in our catchment area. I'm really not concerned."
Like a similar physician-owned hospital project in Moore, Okla., (May 15, p. 3), the challenge of securing managed-care contracts would be solved by physicians bringing their contracts with them to the new facility, Kennedy said.
Anthony German, CEO of Kell West Regional Hospital, a 26-bed physician-owned facility in Wichita Falls, Texas, which he said is making money, cautioned against certain assumptions.
"One big misconception is that if the doctors have a contract, then the hospital also will get access to the network," German said. "We've had to negotiate every single contract as a new facility."