Scott & White Healthcare, the physician led and managed system based in Temple, Texas, is going ahead with plans to make a children’s hospital out of a struggling facility acquired earlier this year, saying the system fulfilled an agreement with the Federal Trade Commission to shop the hospital to another buyer.
Earlier this month, Seton Family of Hospitals, an Austin, Texas-based division of Ascension Health, refused an offer to assume the assets and liabilities of King’s Daughters Hospital in Temple. Scott & White characterized the offer as part of a settlement agreement reached with the FTC to resolve concerns that the deal allowed the system to lock up the market for acute care in the Temple area. The FTC continued to decline to confirm or deny any aspect of the scenario. The Texas attorney general’s office, which Scott & White say participated in the talks, declined to comment.
According to Seton, it wasn’t much of an offer. Both sides say the terms of the offer theoretically wound back the clock to April 1, the day the hospital became Scott & White’s.
Mark Hazelwood, president and CEO of Seton’s north market, called the concept a “fiction” that ignored the reality that King’s Daughters’ operating value has declined significantly since that day.
“Nobody was really working too hard to make this work,” Hazelwood says. In a three-page letter delivered to Scott & White, Hazelwood wrote that Scott & White’s unwillingness to modify the terms “effectively destroyed the economic viability of the asset and in the process will deny patients the ability to choose an alternative to Scott & White in the Temple service area.”
In 2008, the board of the previously independent King’s Daughters went looking for suitors and at one point drew a letter of intent to enter exclusive talks with Seton. The hospital instead turned to Scott & White. “We basically stepped forward and saved the organization,” says Peter Brumleve, Scott & White’s chief strategy officer.
Since April, Scott & White has operated King’s Daughters as a general acute-care hospital, which Brumleve says the FTC requested pending its antitrust review.
Hazelwood’s letter noted that the hospital’s patient volume plummeted to six from 25, after general and orthopedic surgeons stopped practicing there.
Gary Looper, interim president and CEO of King’s Daughters, disputed the suggestion that Scott & White allowed the hospital to wither on its watch. Looper works for Community Hospital Corp., a not-for-profit management and consulting firm based in Plano, Texas, which was hired in February to run the hospital. He attributed the physician losses to routine retirements and career changes experienced by King’s Daughters Clinic, an independent practice. Operating losses and patient satisfaction improved in the fiscal year that started the day Scott & White assumed ownership, Looper says.
But Seton, a division of Ascension, remains determined to compete on Scott & White’s turf.
“This whole experience and the resources we put behind evaluating this opportunity only went to reinforce the imperative to establish a presence in this area,” Hazelwood says.
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