The Florida attorney general is threatening to take away custody of St. Mary's Hospital in West Palm Beach from its parent company, Intracoastal Health Systems, to save the hospital from closing.
"The best use of the (St. Mary's) charitable assets are to remain as they are -- as an acute-care facility," said Cece Dykas, an assistant deputy attorney general in Fort Lauderdale.
But Intracoastal disagrees. So much so, in fact, that the system said it is putting both of its hospitals up for sale for 60 days to see if someone else wants to take a crack at running them.
The move to sell the hospitals is an attempt to "definitely answer that question," said Robert Stanek, executive vice president and chief operating officer of Catholic Health East.
Catholic Health East, a Roman Catholic system based in Newtown Square, Pa., owns 460-bed St. Mary's and runs Intracoastal, which also operates 341-bed Good Samaritan Medical Center in West Palm Beach. CHE is scheduled to take sole ownership of Intracoastal as well as Good Samaritan by 2002 under a restructuring plan approved by Intracoastal's board last August.
At deadline, however, neither side has called each other's bluff. The state has yet to file its lawsuit in state court seeking to turn custody of St. Mary's over to a newly created board of directors, and Intracoastal has yet to formally put its hospitals up for sale by issuing a request for proposals.
If a buyer isn't found for the hospitals, that will show the attorney general "we have done everything in our power," Stanek said.
At that point, CHE plans to move forward with trying to gain approval to consolidate acute-care services at Good Samaritan, Stanek said. CHE will need approval from the attorney general, which oversees the charitable assets of not-for-profits.
But that approval seems unlikely given the attorney general's inch-thick report that examined the finances of Intracoastal's hospitals and the legalities of the proposed St. Mary's closure.
The state prepared the report in response to Intracoastal's proposed closure of St. Mary's and released it publicly Dec. 19.
The attorney general's report paints a dismal financial picture for Intracoastal, saying that Intracoastal and its two hospitals can no longer operate as acute-care providers without outside cash subsidies of more than $156 million by 2005.
Intracoastal posted a net loss of $82.3 million in the fiscal year ended June 30, 2000, compared with a net loss of $22.7 million in the fiscal year ended June 30, 1999, according to figures provided by the system.
An outside consulting firm hired by the attorney general concluded that Intracoastal's finances have deteriorated because of decreased net revenue per adjusted admission at the two hospitals. Reasons for this include billing problems where both St. Mary's and Good Samaritan failed to collect millions of dollars they were due in Medicaid payments. Another problem was declining reimbursements relative to the hospitals' patient-care charges.
Some of Intracoastal's problems stem from the beginning. The attorney general's report said the 1994 merger that created the system failed to meet its goals because managed-care contracts weren't renegotiated and market share wasn't increased.
The merger, the attorney general's report concludes, caused the financial health of St. Mary's, which once had profitable operations, to decline.
If the attorney general succeeds in separating St. Mary's from Intracoastal, the state sets out no surefire plan for its success.
"Our remedy takes into account that the community is going to step up to the plate like they say they want to," Dykas said.
Stanek said the attorney general's report reached the same conclusion as two other financial studies -- one done by a turnaround firm hired by Intracoastal and another by consultants hired by a community group.
"They all indicated that it was not financially feasible in the current environment to maintain two acute-care facilities three miles apart with duplicative services," he said.