One of the nation's two largest for-profit hospital chains likely will buy a struggling two-hospital system in Florida after the state stopped the system from closing one of its facilities.
The events, which unfolded last week on Florida's east coast, bolster the cause of state attorneys general who want to intervene in the business decisions of private not-for-profit corporations. The situation also casts HCA-The Healthcare Co. and Tenet Healthcare Corp. in the unlikely role of community hospital saviors, with each agreeing to keep the facilities open while providing the same levels of charity care. Historically, it has been the for-profit sector that has been accused of closing hospitals and services and limiting care to the poor to reduce costs and increase profits.
"This is the outcome the community wanted. They wanted both hospitals (to) remain open," said Florida Attorney General Robert Butterworth.
The March 8 out-of-court settlement between Butterworth and Intracoastal Health Systems, West Palm Beach, Fla., ended a two-month legal battle. The agreement put the kibosh on a controversial plan by Intracoastal to consolidate the acute-care services of its two West Palm Beach hospitals-460-bed St. Mary's Hospital and 341-bed Good Samaritan Medical Center.
The settlement was hashed out during more than 20 hours of court-ordered mediation. The next step is for Intracoastal to pick between HCA and Tenet in the next few weeks.
Butterworth sued Intracoastal in January in Palm Beach County Circuit Court to prevent the consolidation, which would have turned St. Mary's into an outpatient center by shifting all acute care to Good Samaritan. Community outrage erupted last September after Intracoastal proposed shutting down St. Mary's acute-care services to help the system stem financial losses, which topped $82.3 million in the fiscal year ended June 30, 2000.
Nashville-based HCA and Santa Barbara, Calif.-based Tenet were the only bidders to meet all the qualifications in a request for proposals that Intracoastal sent out late last year to gauge interest in its hospitals.
Stepping in to snap up a struggling hospital is a familiar role for both HCA and Tenet, which frequently use their deep pockets to purchase facilities that other buyers find unattractive. But playing the part of savior by agreeing to keep Good Samaritan and St. Mary's operating as acute-care facilities for at least 10 years is unfamiliar territory for the chains. Each of the companies owns three other hospitals in West Palm Beach.
But a sale to a for-profit provider chain isn't necessarily what Intracoastal wanted, said J. Michael Burman, a North Palm Beach, Fla., lawyer representing Intracoastal.
"I would have preferred to have my client running those hospitals under the service reconfiguration plan," Burman said.
If a deal with HCA or Tenet doesn't materialize, Intracoastal and Newtown Square, Pa.-based Catholic Health East, one of Intracoastal's owners, have agreed to keep the hospitals running or approach the attorney general about other alternatives.
For some in the community, it doesn't matter who owns the two hospitals as long as St. Mary's remains a safety net for the county's poor.
"As far as profit or nonprofit, it's not as relevant for us as long as the hospital is full-service and poor people can go there and be treated," said the Rev. Thomas Masters, pastor of the New Macedonia Baptist Church in Riviera Beach, Fla.
In their responses to Intracoastal's request for bids, both HCA and Tenet pledged to provide at least the average level of charity care St. Mary's and Good Samaritan have provided during the past 10 years.
"They more than exceeded all the issues that an attorney general is concerned with in terms of commitment to the community . . . specifically charity care," said Cecile Dykas, an assistant deputy attorney general.
A court-appointed master will oversee any sale, which Intracoastal expects to complete by June 30, the end of its fiscal year.
Burman said the settlement of the lawsuit didn't give either side what it wanted.
For example, Butterworth's lawsuit had asked the court to appoint a new board of directors to oversee St. Mary's and also asked the court to dissolve Intracoastal as a corporation. Neither happened.
Likewise, Intracoastal and its hospitals were hoping to win the lawsuit by proving Butterworth didn't have the authority to interfere in Intracoastal's business because the system is a private not-for-profit corporation.
The closest the court came to addressing that issue was after a Feb. 26 pretrial hearing. Circuit Court Judge Jorge Labarga said the attorney general had raised sufficient legal claims that Intracoastal's hospitals are charitable trusts and therefore should be subject to a higher level of state scrutiny.