Abstract
The stand-alone osteopathic hospital was a necessity to the osteopathic medical profession in an era when it was isolated from allopathic medicine. As osteopathic medicine has become increasingly integrated with allopathic medicine, however, an independent osteopathic hospital is no longer a necessity. Moreover, a stand-alone institution seems to be economically out of place in today's market. The Osteopathic Medical Center of Texas in Fort Worth is an example of a stand-alone hospital that was unable to capitalize on the benefits realized by integrated hospital systems. The author believes that this failure contributed to the institution's demise. The market power of a hospital system can be used for more favorable contracting with vendors and providers, as well as facilitating negotiations with payers. System affiliation provides economic efficiency, security, and protection in the highly uncertain, complex, and competitive healthcare market.
The last osteopathic hospital in Texas ceased all operations in the fall of 2004.
1,2 The Osteopathic Medical Center of Texas (OMCT) in Fort Worth was one of 35 osteopathic hospitals in Texas as recently as 1988.
3 The closing of the OMCT was due to management issues
4 and transition factors affecting osteopathic medicine in general, such as changing physician referral behavior.
5,6 Management problems included lack of participation in a hospital system, accounting and information system deficiencies,
7 high levels of debt, and poor liquidity.
8,9 The purpose of this article is to explore the issues faced by independent osteopathic hospitals in light of the transformation of osteopathic medicine and the trend of independent hospitals joining hospital systems.
The Osteopathic Medical Center of Texas was more reliant on public payers such as Medicare and Medicaid than many of its competitors. Public payers have commonly offered more constrained reimbursement than commercial health insurers. In 2001, the OMCT's inpatient reimbursement from commercial insurers was estimated to be 10.5% of inpatient revenues compared with a statewide average of 33.5% (written communication, October 2003).
Managed care also proved to be a challenge. The hospital did not seem to fare well with capitated contracts and retreated from such terms.
8,9 One large managed care payer's decision to abruptly scale back its capitated programs in 2003 substantially affected the hospital.
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In another development, the Dallas-based nonprofit Baylor Health Care System acquired two hospitals.
1 This development infused capital into a hospital system, thus building more competition for the unaffiliated OMCT.
In addition, the OMCT's venture into for-profit, nonhospital healthcare services may have become an added drag on its bottom line (written communication, October 2003).