Undaunted by the financial troubles that have plagued other physician-owned hospitals around the country, doctors at several Houston-area hospitals are spearheading an effort to build a new not-for-profit hospital in the growing suburb of Pearland.
The physicians formed a not-for-profit corporation and expect to break ground on the $57 million, 100-bed project in September, said Don McCormick, the administrator of SEMNet, a Houston-based independent practice association.
McCormick said existing hospitals are overcrowded because large healthcare systems "didn't make any provision" for growth in Pearland and other towns south of Houston. "There is a need for about 250 (additional) beds in the community," he said.
The closest hospital, 215-bed Memorial Hermann Southeast Hospital, Houston, is five miles away. It's owned by Houston-based Memorial Hermann Healthcare System. Memorial Hermann officials could not be reached for comment last week.
In March, the city of Pearland created a bonding authority to issue tax-exempt debt to finance the hospital. Additional funding is being provided in the form of land donation, city officials said.
Also in the works is a $40 million physician-owned outpatient facility, which will be located adjacent to the hospital. Physicians must contribute at least 20% of the cost, or $8 million, to obtain a bank loan, McCormick said. So far, about $3 million has been raised from 29 physicians, he said.
McCormick said he expects about 150 physicians to invest up to $100,000 apiece.
But Mike Chance, executive director of the Pearland Economic Development Corp., which helped locate a site for the hospital, said financing could be an obstacle. The doctors "will be putting up money for the next two years or more before they have any income," he said.
Morgan Keegan & Co., an investment banking firm based in Memphis, Tenn., has been working with the physicians on financing. In addition, Chance said, "None of them have the experience of starting a hospital from scratch."
McCormick said the doctors plan to hire a management company. He added that the hospital is "a matter of esprit de corps for the community."
Pearland Deputy City Manager Alan Mueller said he's aware of overcrowded emergency rooms and surgical facilities at Memorial Southeast, but there's been no outcry in the community. "There probably is some level of need based on the growth in this area. Whether this (hospital) is the best way to address it, I don't know," Mueller said.