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Heart Hospital to Get One Owner: Community Medical Centers Will Buy Out Physicians' Shares.

Posted on: Tuesday, 13 June 2006, 09:01 CDT

By Bethany Clough, The Fresno Bee, Calif.

Jun. 13--Community Medical Centers will become the sole owner of the Fresno Heart Hospital after it buys out shares of the specialty hospital held by doctors.

Executives announced the change Monday. It allows the hospital more flexibility and the ability to expand.

Community also announced Monday that it reached an agreement with a state agency on a new reimbursement rate for treating Medi-Cal patients admitted to the hospitals.

The for-profit Fresno Heart Hospital is across from Woodward Park in north Fresno. The nonprofit Community Medical Centers currently owns 51% of the hospital, and 47 physician investors own the remaining 49%.

The hospital is filling only about a third of its beds and lost $10 million in 2003, its first year. It lost an additional $4.5 million by August 2005. The hospital is now "approaching the break-even point," said John Zelezny, senior vice president and spokesman for Community.

"There are multiple reasons why this restructuring is a good thing to do," he said.

One of them is a federal moratorium on expanding services at physician-owned hospitals. Although that moratorium is due to expire, legislation in Congress could extend it, Zelezny said.

State regulators are also carefully watching "physician-owned specialty hospitals," he said.

"It's very difficult for us to have the flexibility we need for the future in that regulatory environment," he said.

The hospital already has added weight-reduction surgery, general surgery and some minimally invasive joint procedures, said Heart Hospital Chief Executive Carolyn Webster.

"It has decreased its loss by adding other services, and that's what we want to continue to do," she said.

Hospital executives also are considering adding operating rooms, she said. There are currently three. Webster did not give specifics about how many operating rooms the hospital might add.

Making the change now also allows the hospital to avoid certain bond requirements, such as having a specific amount of cash on hand, Webster said.

The hospital will buy back the doctors' shares or allow them to exchange their shares for interest in other nearby undeveloped hospital property.

Webster declined to say how much the hospital will pay the doctors. They will get the "fair market value" as determined by an independent appraiser, Webster and Zelezny said.

The buyout will be paid for with "cash on hand," Zelezny said.

Community also announced Monday it had negotiated a new reimbursement rate for inpatient care of Medi-Cal recipients across the health-care organization.

Medi-Cal is the health insurance program for California's poor.

Community had planned to terminate its contract with the state's California Medical Assistance Commission after it expired May 20 because of the low reimbursement rate. The negotiating deadline was extended.

Community executives have said the last contract reimbursed the hospitals 36% of the cost of treating the patients.

They also said Community was losing $30 million a year on Medi-Cal patients, while the cost of treating these patients rose 21% in recent years.

Zelezny wouldn't say how much the hospitals are being reimbursed by the state under the new contract, saying the agreement is confidential.

The commission, which negotiates on behalf of the California Department of Health Services, did not return calls seeking a comment.

The new rate is better than the previous one, Zelezny said.

"We think we've achieved a fair rate," he said. "It was very important that we do that. Medi-Cal is a large portion of Community's business and a growing portion."

He said the new rate was "good news for the patients in this community."

The reporter can be reached at bclough@fresnobee.com or (559) 441-6431.

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Copyright (c) 2006, The Fresno Bee, Calif.

Distributed by Knight Ridder/Tribune Business News.

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Source: The Fresno Bee

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