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[MEDICAL] Julie Inouye is part of a group seeking to bu a Tenet-owned Hospital

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  • madchinaman
    Doctors Hospital Bids Raise Ethical Worries As physicians seek to buy Tenet holdings, critics wonder whether profit would come before patients. By Lisa
    Message 1 of 1 , Apr 12, 2004
      Doctors' Hospital Bids Raise Ethical Worries
      As physicians seek to buy Tenet holdings, critics wonder whether
      profit would come before patients.
      By Lisa Girion, Times Staff Writer


      Julie Inouye, who led the community revolt two years ago that
      prevented Santa Barbara-based Tenet from closing the hospital's
      doors, is director of the group, called Community Action for
      Healthcare Reform and Education. (http://www.the-calculating-
      lady.com/somh/home.shtml /
      nid=446868248&nneighid=387582905&nsupercity=839516939 / 310-306-1487)


      As many as 15 doctor groups are vying for stakes in some of the
      California hospitals that Tenet Healthcare Corp. plans to sell,
      raising concerns that the physicians' financial motives may conflict
      with patient care.

      Tenet, the nation's second-largest hospital chain, has been battered
      by scandal, multiple federal investigations over its business
      practices and soaring losses. To cut costs and focus on its most
      profitable hospitals, the company is selling 26 of its weakest
      facilities, including 18 in California.

      One on the block is Daniel Freeman Marina Hospital in Marina del
      Rey. A local investment group, which includes some doctors, is
      trying to line up financing and hopes to meet Tenet's qualifications
      to bid on the 166-bed facility. The group would operate it as a

      Julie Inouye, who led the community revolt two years ago that
      prevented Santa Barbara-based Tenet from closing the hospital's
      doors, is director of the group, called Community Action for
      Healthcare Reform and Education. (http://www.the-calculating-

      It fears that if Daniel Freeman Marina is sold to a for-profit
      company, the hospital, which sits on valuable real estate, may once
      again be in jeopardy.

      "After saving the hospital, the community is very well informed as
      to who we are, and they are backing us 100%," Inouye said. "We want
      to take this hospital back."

      Another team of investors, which includes doctors and hospital
      administrators, is considering whether to bid on the Marina del Rey
      facility as well as Tenet's larger Daniel Freeman Memorial Hospital
      and Centinela Hospital Medical Center, both in Inglewood.

      If this group succeeds, the doctors' financial stake would not
      be "significant enough in ownership to affect the direction of the
      hospitals," said Michael Finnigan, a Centinela Hospital board member
      who is leading the effort.

      "That's not a group from whom you look for a majority of your
      investment capital," said Finnigan, former chief financial officer
      of Hollywood Park. "But we are interested in having [the doctors]
      feel like they are a part of the enterprise where they practice."

      Doctor-owned hospitals have all but disappeared nationally since the
      Medicare Act in 1965 prompted many to sell out to for-profit
      operators. And the interest by doctors in the high-profile Tenet
      sell-off is likely to renew the debate over whether the benefits of
      doctor-owned hospitals are worth the potential conflicts of interest.

      Federal laws prohibit a doctor from being paid for referrals and in
      most cases from referring Medicare and Medicaid patients to
      healthcare providers and services in which the physician has a
      financial interest. The laws were intended to prevent a doctor's
      personal financial concerns from influencing where and how a patient
      was treated. But the laws have an exemption that allows a doctor to
      refer patients to hospitals where the physician is a part-owner.

      Tenet paid $54 million to settle a federal investigation of
      allegations of hundreds of unnecessary heart surgeries at its
      Redding, Calif., hospital, and it still faces scores of related
      lawsuits. Tenet also faces a government probe of cardiac procedures
      at some of the Los Angeles-area hospitals up for sale as well as a
      chainwide investigation of the company's financial relationships
      with doctors.

      The allegations in the Redding case raise the question of whether it
      makes sense for a physician's income to be tied to a hospital's
      revenue, said Princeton University economics professor Uwe E.

      "There is something a bit disconcerting when you go in to a
      cardiologist and he is part-owner of, say, 'Mercy Hospital,' and he
      recommends you have heart surgery and refers you to a colleague who
      is also a part-owner," Reinhardt said. "Do we want to run medical
      practices the way [auto] body shops are?"

      Other critics worry that doctors, in order to make a profit, might
      turn all-purpose hospitals into specialized orthopedic surgery or
      cardiac care boutiques.

      "The concern is that they will close the trauma centers and
      emergency rooms and turn these hospitals into specialty clinics
      where they can be assured very lucrative treatments," said Jerry
      Flanagan, a spokesman for the Foundation for Taxpayer and Consumer

      Most of the California hospitals Tenet has earmarked for sale need
      major seismic upgrades. The company expects to get only about $300
      million for all 26 facilities, plus $300 million in tax breaks.

      Tenet said it had already qualified 92 bidders for the hospitals and
      had at least one offer for each facility. Tenet has pledged to find
      buyers committed to keeping all the hospitals open as general-care
      centers. The company declined to add details and has required
      bidders to keep negotiations secret.

      Interest is coming from hospital chains as well as physician groups,
      according to sources close to the negotiations. In some cases the
      doctor groups are competing against one another and are partnering
      with for-profit companies to buy the hospitals.

      "We're treating all prospective buyers equally as they enter into
      the qualification process," said Tenet spokesman Steven Campanini.

      Proponents of doctor-owned hospitals said there was no evidence that
      hospital ownership would prompt good doctors to make bad decisions
      about patient care.

      Hospital ownership could allow doctors to better serve patients and
      to reduce costs, said California Medical Assn. Chief Executive Dr.
      Jack Lewin. No major California hospitals today are doctor-owned,
      and the idea carries some risk, Lewin conceded. But given rising
      healthcare costs, he said, it's worth a try.

      "The economic forces don't align very well when hospitals,
      physicians, health plans, pharmacies and laboratories are all
      competing," he said.

      Half of the Tenet hospitals for sale in California were unprofitable
      in the fourth quarter, according to unaudited, pretax figures the
      company provided the state.

      Given the poor returns, bidders may be suffering from what one
      consultant called "buyer's syndrome," convinced that they can get
      better results than the seller.

      "If you are buying a Tenet hospital and think you are going to run
      it at a better margin than Tenet, then you are dreaming," said
      Joshua A. Nemzoff, a New Hope, Pa., healthcare consultant who
      doesn't represent any bidders for the Tenet properties. "There are
      not too many hospital chains that can run a hospital better than
      Tenet, and by better I mean at a higher margin."

      On the other hand, new owners may be able to negotiate better rates
      with health maintenance organizations and insurers whose
      relationships with Tenet soured after the chain ratcheted up its
      charges. Doctors also might be able to increase revenue by bringing
      patients with them.

      "Doctors could own a hospital and move their outpatient volume from
      a surgery center to the hospital," said Steve Valentine, an El
      Segundo healthcare consultant representing several groups bidding
      for Tenet hospitals.
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