July, 1998
This article was written by the Consumers Union Southwest Regional Office.
HealthTrust, Inc., a large for-profit health care corporation based in Nashville, purchased the nonprofit Baylor Medical Center at Gilmer from the Baylor Health Care System in January 1993. While the Baylor Health Care System kept the money from the sale for its statewide nonprofit mission, the community ultimately lost a significant charitable asset, and its only hospital, when Columbia/HCA bought out HealthTrust then closed the Gilmer facility in September 1995.
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Case Study: Baylor Medical Center at Gilmer Columbia owned the facility barely six months before closing it in September, 1995. Columbia said that the hospital suffered from insufficient patient demand, but ironically, the insufficient patient demand resulted in part from HealthTrust/Columbia policies to send surgeries and births to Longview, leaving the Gilmer hospital with a dwindling patient base. |
Gilmer Medical Center started as a local project. Ted Ford, a local doctor, wanted to bring a hospital to Upshur County. He secured a Farmer's Home Administration loan and began construction of the Ford Memorial Hospital, originally incorporated as a nonprofit in 1980. 1 According to the articles of incorporation, the charitable nonprofit would own and run a community hospital through a local Board of Trustees (all members were to reside in Upshur county).2
However, in 1982 the hospital was transferred to Baylor University Health System. The new facility, renamed the Baylor Medical Center of Gilmer in 1986, 3 became a part of Baylor's larger nonprofit health care network serving other Texas areas.
Baylor amended Gilmer's Articles to eliminate reference to the "community" hospital; the new purpose instead included promoting "the public health of the United States of America and all persons in general." Baylor also eliminated the requirement that the Gilmer Trustees reside in Upshur County, and instead instituted a board of Trustees appointed by Baylor with limited authority. Final authority to borrow money, sell the assets or amend the purpose of the corporation shifted to the Baylor Health Care System Board of Trustees.4 Although Baylor broadened the hospital's official purpose, its nonprofit tax returns indicate that it continued to fulfill its charitable mission by providing medical care to indigent Upshur County patients, regardless of their ability to pay.5
Between 1982 and 1990 Baylor incurred $9.2 million in losses on the Gilmer facility, according to Baylor representatives. In 1990 Baylor told the local board of trustees that its "guiding philosophy would require it to divest or convert to other use any community hospital that did not yield a reasonable financial return on investment within three years."6
Apparently, Gilmer did not meet this requirement because Baylor sold the facility's assets and properties to Longview Regional Hospital owned by HealthTrust, Inc., on January 14, 1993. At the time of the announcement, Baylor did not disclose the terms of the agreement,7 although its IRS 990 filed 18 months later valued the sale at $1.6 million.8 Since the Gilmer hospital was part of a larger nonprofit organization, Baylor kept the money from the sale and did not create a separate charitable foundation dedicated to community indigent care needs.
Initially, the sale of Gilmer Medical Center appeared to brighten the facility's prospects. HealthTrust boasted past experience in operating stand alone hospitals in small, rural communities. Further, HealthTrust representatives claimed that Gilmer's proximity to HealthTrust's Longview Regional Hospital could allow for additional economies of scale and operating efficiencies.9
In the end, Gilmer Medical Center operated under HealthTrust for just over a year. In March 1995, Columbia/HCA, the largest for-profit hospital network in the U.S., acquired HealthTrust, thus inheriting the Gilmer facility.10 The financial terms of the merger were not disclosed to the community.
Columbia owned the facility barely six months before closing it in September, 1995. 11 Columbia's Lone Star Division President, Steve Blaine, claimed that the hospital suffered from insufficient patient demand and the potential for lower revenues from proposed federal cuts in Medicare and Medicaid payments.12 Ironically, the insufficient patient demand resulted in part from HealthTrust/Columbia policies to send surgeries and births to Longview, leaving the Gilmer hospital with a dwindling patient base, according to local officials.13
