News in brief - Dec. 13, 2004

Suit claims WellPoint owes back taxes - Select Medical agrees to buy SemperCare - MedCath announces new president - HealthSouth to sell "digital hospital"

Suit claims WellPoint owes back taxes

A consumer group has filed a lawsuit against a California official seeking to force him to collect as much as $500 million in back taxes that it says should have been paid by WellPoint Health Networks since 1996.

The Foundation for Taxpayer and Consumer Rights, filing in Los Angeles County Superior Court, wants state Controller Steve Westly to direct WellPoint to pay on behalf of its subsidiary, Blue Cross of California.

The funds in question, if they had been paid, would have been comprised of taxes on gross premiums that are normally assessed on private health insurers, but for which WellPoint has been permitted exemptions.

A spokesman for Blue Cross of California, Michael Chee, said it has followed state tax laws and regulations, has been audited and believes it was declared to be in compliance.

The company in the past has said it pays state franchise fees on its PPO net income instead of paying the gross premium taxes, as other for-profit insurers in the state do.

Westly was unavailable for comment.

Select Medical agrees to buy SemperCare

Long-term acute-care hospital operator Select Medical Corp. has reached an agreement to buy competitor SemperCare Inc., of Plano, Texas, for about $100 million.

Select, which is based in Mechanicsburg, Pa., operates 82 long-term care hospitals in 25 states. With the acquisition of SemperCare, Select takes over a company with 17 long-term acute-care hospitals in 11 states and revenues of roughly $110.6 million for the first nine months of this year.

The sale, which is subject to regulatory approval, is expected to close in the first quarter of 2005. Select said the purchase price is subject to adjustment based on SemperCare's working capital at the time of closing.

Select is in the process of being acquired by an investment group. The deal, which is valued at about $2.3 billion and is expected to be completed in the first quarter of 2005, would make Select a privately held company and wholly owned subsidiary of EGL Holding Co.

MedCath announces new president

Charlotte, N.C.-based MedCath Corp., which owns and operates heart hospitals as joint ventures with physicians, recently announced it had named Charles R. Slaton as president.

Slaton, who had been the company's chief operating officer, will retain his previous title in addition to his new position. The former company president, John T. Casey, will remain chair and CEO.

MedCath owns 13 hospitals with 759 licensed beds in nine states. It recently changed its strategy to include pursuing partnerships with hospitals in addition to physician groups.

HealthSouth to sell "digital hospital"

HealthSouth Corp. has entered into exclusive negotiations to sell its "digital hospital" in Birmingham, Ala., to a partnership of Baptist Health System and Samford University.

The state-of-the-art facility showcasing cutting-edge technology was once touted as a hospital that would be a model for the world. But work on the $300 million facility slowed and its future was clouded as HealthSouth re-evaluated its capital expenditures in the wake of financial woes and an accounting scandal that was first revealed in March 2003.

The nonprofit Baptist Health System Inc., is Alabama's largest health care system. Samford University, in Birmingham, is Alabama's largest private university.