Investors scrubbed plans for a 40-bed heart hospital in New Albany, Ind., officially because of increased land costs. But at the same time, concerns were being raised about whether the hospital would be exempted from an 18-month federal ban on physician investment in new specialty hospitals.
In addition, the moratorium may have cut off a second round of physicians from investing in a heart hospital that opened recently in Louisiana, a hospital official there said.
Investors in the $11 million Kentuckiana Heart Hospital said owners wanted too high a price to renew options for purchasing land. But the for-profit hospital, opposed by not-for-profit facilities in Indiana and nearby Louisville, Ky., also faced questions over whether it had won final zoning board approval by Nov. 18, 2003, the deadline for an exemption from the moratorium. The Louisville cardiologist who heads the investor group did not return calls seeking comment.
Mike Laville, an attorney for developer Cardiovascular Hospitals of America, said the uncertain nature of the exemptions probably played a role. "From a business standpoint, this moratorium deal is iffy enough," he said. "What you're doing is plopping down a lot of money for property not knowing whether the moratorium is going to hold up."
Meanwhile, MedCath Corp., Charlotte, N.C., said it had completed a period of rapid development with the opening of its 13th cardiac-care hospital, 32-bed Heart Hospital of Lafayette (La.). The hospital is MedCath's second in Louisiana and its fifth opening in 18 months.
The accelerated development period was part of a long-standing strategic plan, MedCath said. The company blamed hospital startup costs, as well as rising bad debt and supply expenses, for a net loss of $933,00 in its fiscal 2004 first quarter, ended Dec. 31, 2003. It has said it may divest hospitals that don't meet its financial or growth objectives.
Phillip Young, president and CEO of Heart Hospital of Lafayette, said "a group of local physicians are in partnership with us here" but would not specify their number or the extent of their stake in the hospital, which received its Medicare certification last week.
Young said the physician investments occurred well before the moratorium on Medicare payments to physician-owners of specialty hospitals took effect Nov. 18, 2003, under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. A grandfather clause in the act exempted from the moratorium physicians who were invested in facilities under development before the effective date.
But the moratorium may well have chilled the interests of additional physicians who may have invested more recently in the facility, he said.
"We had lots of people interested," Young said. "If you took everyone who voiced an interest, it would be 12 or more."
Joseph Conn contributed to this story.