News in brief - Sept. 27, 2004

MinuteClinic gets financing - Mich. societies sues Blues - HealthSouth appoints new CFO - Another California hospital to close

MinuteClinic gets financing

Minneapolis-based MinuteClinic, which owns and operates small health care clinics in retail stores such as Target, has received an infusion of financing from several capital venture firms and is stepping up its plans to expand beyond its current sites in Minnesota and Maryland, the company said.

The clinic, which has a dozen clinics in Target and Cub Foods stores in the Twin Cities area and planned to open eight clinics in the Baltimore area by the end of September, said it had completed a second round of tiered institutional financing totaling $15 million, led by Boston-based Bain Capital Ventures. Additional investors included TGap Ventures LLC of Kalamazoo, Mich.

MinuteClinic, which has said it wants to open 400 clinics in 200 cities in the next three years, offers basic medical care and vaccinations on a no-appointment basis. The offices are staffed by nurse practitioners or physician assistants.

Mich. societies sues Blues

The Michigan State Medical Society and the Michigan Osteopathic Assn. on Sept. 9 filed suit against BlueCross BlueShield of Michigan, charging that the payer is unfairly fixing prices for office visits by members of the United Auto Workers and their families.

The suit seeks a declaratory judgment from the Ingham County Circuit Court affirming that doctors do not have to charge discounted fees set by the Blues plan for office visits because UAW workers must pay 100% co-payments or meet very high deductibles for the visits under newly negotiated PPO contracts. The medical societies argue that under such circumstances the health plan is falsely claiming that these office visits are "covered benefits," and mandating adherence to the fee schedule, even though no actual benefits are typically received.

The medical societies want to be guaranteed that doctors who decline to accept the fee schedules will not be excluded from any of the Blues plans' PPO networks.

BlueCross BlueShield responded that doctors are obligated to the fee schedule to which they agreed when they signed what's called the Trust Network Agreement. It covers more than 1 million patients enrolled in several different Blue Cross PPOs.

HealthSouth appoints new CFO

HealthSouth has appointed a manufacturing executive to be its new chief financial officer, a position that had been temporarily staffed by an outside corporate turnaround specialist after a major accounting scandal at the outpatient services giant was revealed.

John Workman, 53, former chief executive of the can manufacturer U.S. Can Co., was tapped to take over the job on Sept. 20. He replaces Guy Sansone, managing director of the turnaround firm Alvarez & Marsal, who has held the post since March 2003.

Workman led U.S. Can for six years, also serving as CFO. The manufacturer had annual revenues of $837 million and was traded on the New York Stock Exchange. He also spent more than 14 years with Montgomery Ward.

He takes over the financial reigns at HealthSouth in the wake of a major accounting scandal in which federal prosecutors have accused the company of overstating earnings by more than $2.7 billion. At least 19 former HealthSouth executives have pleaded guilty to criminal charges since the scandal broke, including five former CFOs.

Another California hospital to close

The San Jose Medical Center in northern California has become the latest in a series of acute care hospitals in the state to make plans to close this year.

The 328-bed, Level II trauma center plans to shut its doors Dec. 9 because of mounting financial woes. The 81-year-old hospital said it is the sixth California hospital to announce its closure in 2004 because of financial deficits.

Leslie Kelsay, a hospital administrator, said San Jose Medical Center had lost $12 million in 2002 and $16.3 million in 2003 and expects to post a larger loss in 2004. She said several factors had fueled its financial problems, including a large number of uninsured patients, low reimbursement from government payers, escalating labor costs and unfunded mandates.

Rather than paying an estimated $55 million to $100 million to retrofit the facility to meet new seismic standards, Kelsay said the hospital had planned to expand its services at a sister facility, Regional Medical Center of San Jose, less than three miles away. Both hospitals are owned by HCA.

The construction was expected to be completed in 2007, at which time San Jose Medical Center would have closed. But Kelsay said the hospital couldn't survive its financial crisis that long.

Still, she said the project to expand at Regional Medical Center is moving forward.