News in brief - June 23, 2003

HealthSouth keeps Alabama hospital - Charge results in loss for Calif. IPA

HealthSouth keeps Alabama hospital

Beleaguered HealthSouth says it will keep its premier hospital in its hometown of Birmingham, Ala., rather than sell it to reduce $3 billion in debt. But the company told the Birmingham News a Miami hospital it owns is still for sale.

The firm sent letters to employees at HealthSouth Medical Center in early June saying the hospital was off the market.

The facility was supposed to be replaced with a digital hospital whose construction was halted when the company tumbled into scandal this year. HealthSouth says it is seeking a joint venture partner to complete the half-built hospital.

So far, 11 former HealthSouth executives, including all five past chief financial officers, have plead guilty to bank or accounting fraud for their role in an alleged $2.5 billion accounting scandal. Company founder Richard Scrushy is under investigation but has not been charged with a crime.

Charge results in loss for Calif. IPA

Hill Physicians Medical Group, one of California's largest independent practice associations, reported a loss in 2002 of $934,000 on $278 million of revenue due to a one-time charge of about $4.4 million for investment losses realized over the last three years. The San Ramon-based group reported net earnings of about $1.7 million on $290 million of revenue in 2001, according to its annual report.

Hill Physicians, which includes more than 2,000 physicians across the state, reported an operating profit in 2002 of about $5.5 million before the charge, a 113% jump from the $2.6 million reported in 2001, according to the report. The group saw the decline in revenue last year, but its expenses dropped by $14.6 million, even with incentive payments to physicians rising from $6.8 million in 2001 to $7.5 million in 2002. The IPA, which gave bonuses to 844 physicians in 2002 and participates in the statewide "Pay for Performance" initiative, plans to boost those payments to $9.5 million this year.

Steve McDermott, the group's CEO, blamed the fall in revenues on fewer patient visits, but credited the group's disease management programs for contributing to reduced costs. The group plans to quantify the achievements of the programs, but officials have anecdotally seen a decline in emergency department visits and fewer inpatient hospital days, which they say are a result of better preventive management and care.

McDermott said the group, which boasts a membership of 330,000 covered lives, said investments have already increased in value by about $2 million this year, and he expects the trend to continue.

"The recovery looks like it's real," McDermott said. "It will take some time, but we think those investments will come back."