FOUNDATION HEALTH: Sells Last Two Hospitals to HealthPlus
After losing $165 million on $8.9 billion in revenues last year and $187 million in 1997, Foundation Health Systems agreed last week to sell its two remaining hospitals, the 127-bed East Los Angeles Doctors Hospital and the 107-bed Memorial Hospital of Gardena, to Houston-based HealthPlus, a private company that owns two hospitals, Modern Healthcare reports. Foundation, which is based in Woodland Hills, CA, "is the nation's fourth-largest publicly traded managed care company, with more than 6 million enrollees in 21 states." The sale represents the end of Foundation's hospital business, which began in 1992 and was "never part of Foundation's core business." Modern Healthcare reports that "HealthPlus is known for pursuing a controversial physician syndication strategy pioneered by Columbia/HCA Healthcare Corp." that requires hospitals to sell their assets to a syndicate "in which physicians can invest." Although the strategy was developed to foster physician loyalty to particular hospitals, it "can run afoul of the anti-kickback provisions of Medicare and Medicaid fraud-and-abuse statutes," which bar incentivizing Medicare or Medicaid referrals. HealthPlus CEO John Styles said in a written statement from last week that the purchase "presents a great opportunity to continue our business plan of working with physicians" locally. Both hospitals operated at a loss in 1997 (Rauber, 7/26).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.