TBO.com - TBO is Tampa Bay Online

Hernando Today

Hospitals Offer Physicians Chance To Invest

ADVERTISEMENT

By TONY MARRERO

Hernando Today

Published: December 31, 2008

BROOKSVILLE - The company that owns Spring Hill and Brooksville Regional hospitals is offering staff physicians the chance to invest in the two facilities.

Health Management Associations Inc., the Naples corporation that owns the hospitals, "plans to convert to a limited liability company" and is allowing doctors to purchase "membership interests," according to a memo obtained by Hernando Today.

The memo was sent to physicians earlier this month inviting them to an informational meeting about the offer.

Pete Lawson, HMA's executive vice president, was slated to describe the venture to physicians at the meeting held Dec. 16 at Silverthorn Country Club in Spring Hill, Kathy Burke, chief executive officer of Brooksville and Spring Hill Regional hospitals, wrote in the memo under the subject heading "Hospital Investment Opportunity."

Physicians would be asked after the meeting to complete a form to indicate their interest in the offer, which HMA officials would use "to determine the feasibility of proceeding" with the venture, Burke wrote.

Several phone messages left at HMA headquarters in Naples were not returned. Burke declined to comment through a hospital spokeswoman.

Physicians who attended the meeting were required to sign a confidentiality agreement stating they would not discuss the information presented at the meeting.

There are several possible benefits to the venture, said Debbie Hogan, an attorney at the Hogan Law Firm in Brooksville.

Hogan specializes in contract law and has represented physicians in contract negotiations with hospitals. She said she was unaware of the HMA offer to local physicians and agreed to comment in general terms about the possible motivation behind such an offering.

For one, there are tax benefits, Hogan said. HMA is a publicly traded corporation. A corporation's income is taxed and so is the dividend paid to stockholders.

That amounts to "double taxation," Hogan said. A limited liability company, or LLC, is only taxed as a partnership.

One of the more obvious benefits of selling membership interest, though, is increased cash flow.

"It's always a way to raise capital when you infuse it with new members," Hogan said.

That can be helpful for a company seeking to make capital improvements - or one that's struggling financially.

The value of HMA's stock has steadily declined in the recent months, from a high of more than $25 per share in 2005 to $1.56 on Monday.

Membership interest also is a way for hospitals to create more loyalty and motivation among its physicians, said Alice Gosler, a Philadelphia attorney who specializes in representing physicians.

Doctors with membership interests may feel like they have "influence to give the hospital a reason to succeed," Gosler said. "It's not just show up and use their facilities."

Federal law prohibits physicians from referring patients to facilities in which they have a financial interest. There are exceptions for physicians investing in a hospital, but the membership interests have to be offered at fair market value and any returns have to be based on the initial investment, not on conditions such as the number of referrals a physician provides.

It's unclear how much, if any, management control physicians would have under the deal, however.

An LLC is bound by an operating agreement, similar to a corporation's bylaws. How that operating agreement is drafted will determine how much say physicians have in management decisions, Hogan said.

Gosler said she has seen such endeavors turn out well for the hospitals and physicians alike. Others have failed.

"It could be a win-win for everybody," she said. "It could be throwing money into a sinkhole."

Reporter Tony Marrero can be reached at 352-544-5286 or lmarrero@herandotoday.com.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT