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Orthopedic center will continue despite management woes

Even though their physician management company recently filed for Chapter 11 bankruptcy protection, physicians and administrators connected with the Lake Tahoe Orthopedic Institute insist that those financial problems will have no effect on their day-to-day operations.

In other words, if you break your leg on a ski slope, the Stateline Medical Center and the new Ambulatory Surgical Center at Round Hill are still open for business.

But what that means in the long term for physician management companies in the Tahoe Basin is not so clear.



BMJ Medical Management Inc., is a Boca Raton, Fla.-based company which manages 22 practices and 177 physicians in seven states. Essentially, BMJ buys into physician practices and handles administrative matters for a percentage of the practice’s revenue (usually 10 percent).

At Lake Tahoe, BMJ entered into a management agreement with the Stateline Medical Center, as well as physicians Keith Swanson, Stephen Abelow and Randy Watson, and put up $2 million to help build the Ambulatory Surgical Center at Round Hill, which opened in mid-October.




Stateline Medical, the practices of Swanson, Abelow and Watson, and the surgical center all fall under the umbrella of the Lake Tahoe Orthopedic Institute. Swanson, Abelow and Watson were issued stock in BMJ as part of the management agreement. In addition, those three doctors, in partnership with eight other Tahoe-area physicians, put up $1 million of their own money to become limited partners in the construction of the surgical center.

“This (bankruptcy) is basically an administrative burden, and will not change our operation at all,” said Abelow, who is celebrating his 20th year as a physician at Lake Tahoe. “It’s a non-entity. We sold management of our practices to this company for 10 percent of our revenue, plus cash and stock. It’s worked out great for us. As far as the financial problems within BMJ, you probably know as much about that as I do.”

In fact, the new surgical center will not be affected at all, according to BMJ Surgery Center Vice President Tom Lally.

“The Ambulatory Surgical Center is a separate entity from Stateline Medical Center and the doctor’s practices,” Lally said. “It’s a separate company (the Surgical Association of Lake Tahoe), which is in limited partnership with BMJ.”

In corporate terms, this is called not keeping all your money in the same pocket. So the arm of BMJ that manages the surgical center technically has not filed for bankruptcy at all.

But what does all this mean in the long term? BMJ is the first management company to make serious overtures to orthopedic specialists in the South Lake Tahoe/Stateline market. Many local physicians were courted by BMJ, and most turned them down.

“And those doctors are very glad they did,” said one local expert not affiliated with Lake Tahoe Orthopedic Institute. “This is an area that plays host to a lot of sports injuries, and BMJ came in here with the idea that they could corner the orthopedic surgery market. But it didn’t work out that way.”

The practice management industry has been in trouble recently because they often have not been able to generate promised cost savings. Because of this, some doctors have begun withholding fees.

That is what happened to BMJ recently, as two of their medical groups in Florida withheld funds in disputes with the company, prompting the Chapter 11 filing. Unlike a more serious Chapter 7 filing, Chapter 11 allows a corporation to restructure itself in order to pay off debts. Still, in the past year, BMJ’s stock plunged from more than $10 a share to less than $1.

This can’t come as good news to the doctors who were issued stock in the company, but they aren’t panicking.

“We’re not fools; we knew this was a start-up company,” said Swanson. “We did not bank our careers on this. So you won’t see us in line for the soup kitchen.

“The good news is that business is up 20 to 25 percent overall, and we’re actually looking to take on another physician.”

BMJ General Counsel Neil Luria claims that BMJ’s financial troubles will have no effect on Lake Tahoe at all.

“Our Lake Tahoe operations have been extremely successful to date,” he said. “We own some of the assets, but not the practices. The practices are owned by the physicians.”

The local consortium that put up the money to help pay for the surgical center would like to buy the other half.

“When we heard that BMJ was filing Chapter 11, we immediately made an offer to buy them out,” Abelow said. “Then we heard that the surgical center wasn’t involved. BMJ wants to keep it, and I don’t blame them. It’s been successful beyond our wildest dreams.”

In its first month of operation, the surgical center projected that it would handle about 23 cases. The actual number was 53 – a total it duplicated in its second month.

So if BMJ does decide to pull out of Lake Tahoe entirely, that wouldn’t hurt doctors at all, according to Abelow.

“What we got out of the deal is wonderful,” Abelow said. “We wanted a state-of-the-art facility, but we needed financing, and we needed clout. BMJ provided that, and we got the thing built. Now they’re in bankruptcy. Well, that’s the way big people play finances. They just reorganize, and things go on as before.”

As part of the management agreement with physician practices, BMJ coordinates health and malpractice insurance contracts – often at one-third the cost that a local practice could obtain – and issues paychecks.

“The concept (of joining with BMJ) was to establish contacts and partnerships with quality orthopedic surgery practices and organizations throughout the country,” Abelow said. “We were able to accomplish that.”

Abelow also stressed that he is happy with Barton Memorial Hospital in South Lake Tahoe, which is “the best in-patient emergency hospital in ski country.”

But the entire health care scene has changed so dramatically over the past two decades and many doctors are not sure what the immediate future has in store.

“The health care industry changed dramatically when Wall Street got involved,” Swanson said. “Medicine is now seen as a profit center. But there are only so many health care dollars to go around.”

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