Five years after buying its local hospital from then Columbia/HCA Healthcare Corp., a Louisiana community has thrown in the towel on local autonomy.
In a deal announced late last month 50-bed Ville Platte (La.) Medical Center in the south central part of the state will be sold to another investor-owned chain, LifePoint Hospitals of Brentwood, Tenn.
Physicians and business leaders in the tight-knit community banded together to buy the hospital in 1996 after the Federal Trade Commission ordered Columbia to divest it. The sale was ordered to eliminate antitrust concerns with Columbia's acquisition of HealthTrust, which owned a nearby hospital.
At the time, Ville Platte leaders hailed the purchase as a victory over a giant chain that they contended valued profits over human resources.
But in an environment in which many community hospitals are having difficulty funding capital improvements, officials in the town of 10,000 decided there aren't enough homegrown dollars to maintain a state-of-the-art facility and finance an expansion.
"We simply didn't have the funds to do what needed to be done," said Charles Buller, chairman of the hospital's board.
As the sole acute-care provider in the town, the hospital has been profitable. It posted net income of $980,000 on revenue of $21.6 million for calendar year 2000.
But profits had been higher, officials said, before Medicare and Medicaid cuts took hold in the late 1990s. Eventually, the hospital's board realized it couldn't deliver on a promised expansion without a capital infusion.
The hospital was leveraged to the hilt after borrowing to fund not only the $10.8 million purchase from Columbia but also the addition of a wellness center and other properties. It signed high-interest lease-purchase agreements to acquire equipment, such as a new cardiac catheterization lab. Debt service is $1.9 million annually.
In addition, the hospital board is sticking to a pledge not to tax the local community to fund operations.
"We basically called everyone in (on the medical staff) and told them the future of the nonprofit community ownership looks fairly dim," Chief Financial Officer Marty Morein said. "Reality set in."
In a search for deep pockets, Ville Platte had its pick among five suitors. In addition to LifePoint, two other finalists were Province Healthcare Co. of Brentwood, Tenn., and Our Lady of Lourdes Regional Medical Center in Lafayette, La., Morein said.
LifePoint has agreed to retire all of the hospital's debt, which is about $12.8 million. The purchase agreement also calls for it to fund about $12 million of capital improvements, roughly doubling the hospital's size.
The transaction is expected to close Nov. 30, pending voter approval of a referendum proposal on Nov. 17 that would dissolve a local public hospital district, which covers part of Evangeline Parish, La. The state attorney general also must approve the change of hospital assets from not-for-profit to for-profit.
For LifePoint, which specializes in rural hospitals, the deal marks its first acquisition of a not-for-profit hospital since its spinoff from HCA, formerly Columbia/HCA, in May 1999. LifePoint Controller Rob Pantoja said the company believes it can greatly reduce the percentage of patients who leave Ville Platte for care, which stands at about 45%, according to Medicare data.
Meanwhile, hospital leaders who had championed the purchase of the hospital from Columbia five years ago are now hailing the sale to LifePoint as another great victory. Buller, for example, called it "a big step forward" that will allow more physicians to practice in the community.
Gregory Ardoin, a pulmonologist and hospital board member, said he believes LifePoint will take a more collaborative approach with the community rather than the top-down management that had been practiced by the former Columbia. "Hospital companies have realized that to be successful, this has to be a team effort," Ardoin said.