Tax laws change Barton’s outpatient plans | TahoeDailyTribune.com
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Tax laws change Barton’s outpatient plans

Rob Bhatt

Conflicts with tax law has forced Barton Memorial Hospital to scrap a partnership with staff physicians to develop an ambulatory surgery center in the old hospital emergency room.

Under the aborted proposal, Barton would have reinvested its share of the profits into other hospital programs while the doctors would have kept their share of the proceeds.

However, attorneys reviewing the proposal on behalf of the hospital and physicians recommended against the plan, Bill Gordon, the hospital’s chief executive officer, said on Wednesday. Under federal tax laws, the hospital could have lost its not-for-profit, tax-exempt status had it allowed the doctors to profit from the venture.

Gordon now intends to dedicate two operating rooms for outpatient procedures in the five-room operating center that opened in 1995. He has not ruled out developing an ambulatory facility in the old emergency room without physician partners.

“We’re still providing ambulatory surgery,” Gordon said. “We’re just going to be going about it differently.”

Ambulatory procedures – including arthroscopic, gallbladder removal and tubal ligation – require only short hospital stays and relatively simple equipment.

During the past decade, facilities have sprung up across the nation that provide these types of operations at considerably less cost than full-service hospitals.

The roughly 300 monthly ambulatory procedures make up about three-fourths of the surgeries performed in Barton’s operating rooms. The hospital last year slashed its ambulatory surgery fees 34 percent to compete with free-standing ambulatory facilities in Incline Village and outside the Tahoe Basin.

Even though the fees were reduced, the hospital’s costs for performing those surgeries did not change. Gordon hopes that a surgical unit dedicated to ambulatory procedures will result in economic efficiency for the hospital and better service for patients.

The push for a site dedicated to ambulatory facilities comes as a group of Barton staff physicians are developing a free-standing outpatient surgery and treatment facility in Round Hill.

The physicians, primarily orthopedic specialists, have joined forces with Bone, Muscle and Joint, Inc., a private corporation based in Florida that is developing similar facilities across the nation.

Included in the partnership are physicians Randy Watson, Keith Swanson and Stephen Abelow. A number of orthopedic specialists from Tahoe Fracture Clinic are reportedly also interested, although TFC officials declined to return phone calls placed to their offices.

Initial estimates by hospital officials indicate the potential dollar value from the loss of orthopedic business to the BMJ facility could total $5 million to $10 million a year.

In the past, ambulatory surgeries have helped subsidize other Barton services including the emergency room, obstetrics and other services that do not generate profits.

Gordon has said that the loss of ambulatory revenue from Barton’s $90 million in annual gross revenue could compromise other services.

Meanwhile, an invitation to Sutter Health President Van Johnson to discuss consolidation at the August hospital board meeting has led to speculation of a possible buyout.

Gordon on Wednesday characterized the scheduled presentation as informational only.

“It is a chance for the board and the leadership of the medical staff to learn about these systems and to ask questions about how it works,” Gordon said. “It’s an educational session. It’s not a session for the board and Sutter to talk about deal points.”

Sutter, a non-profit community health network, owns or is affiliated with 26 full-service hospitals in Northern California and is the nation’s eighth largest health system, said corporate vice president Bill Gleeson.

During the past five years, Sutter, based in Sacramento, has formed partnerships with rural California hospitals in Las Banos, Merced and Tracy.

Gleeson said the company’s policy is to not comment about speculated consolidations “until or unless there is something substantive to report.

“We do a lot of talking to hospitals interested in partnering,” he added. “We are always interested in expanding the network.”

He declined to comment about any possible consolidation with Barton.

Gordon said he does not anticipate the hospital consolidating with a larger network in the next two years.

However, he said it is impossible to tell what may happen beyond that.


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