The Downfall Of A North Texas Doctor-Owned Hospital

Forest Park Medical Center opened five hospitals in Texas in just six years. Now they’re all closed, filing for bankruptcy or defaulting on loans.

By Lauren SilvermanJanuary 7, 2016 10:27 am, , ,

This story originally appeared on KERA News.

The Forest Park Medical Center campuses were supposed to be more like spas than hospitals.  And they were —  from the hand cut stone and sculptures to the lavish trees and fancy menu.

Despite the extravagant decorations, the basic business model just didn’t work. The Dallas campus has closed, and the others have either filed for bankruptcy or defaulted on loans.

The idea for Forest Park Medical Center, reporter Matt Goodman says, was to appeal to doctors who wanted more control at the hospitals they worked at. Doctors who were tired of being treated as employees.

“So these guys said hey, we can get the guys to invest in it, we can get the money, and as long as it’s operating they can get returns and they’ll also have this beautiful, big hospital to practice in,” says Goodman, who’s been covering the rise and fall of Forest Park Medical Center for D Magazine’s D Healthcare Daily.

The doctor-owned hospital idea wasn’t new in 2009. What was new? The fierce rate of expansion. Forest Park Medical Center opened five hospitals in Texas in just six years. Goodman says the business model was complicated.

“The way they kind of differed,” Goodman says, “was they started these companies around it that would handle the real estate, that would manage the facilities, a capital investment firm that would try and generate money to pay for this stuff and keep it going… and they were ultra-luxury.”

To put it simply, Forest Park Medical Center in Dallas was like a gold-plated house of Popsicle sticks.

First, critics tried to blow the structure down.

“A lot of the competition hated Forest Park, they were viewed as excessive, and people questioned their motives,” Goodman says.

KERA reached out to Forest Park Medical Center but didn’t get a response.

Ultimately, naysayers didn’t sabotage the Dallas hospital. Goodman says the main reasons that campus closed in November were the Affordable Care Act and mismanagement.

See, the hospitals relied on money from out-of-network payments. As insurers tried to keep premiums down by limiting those out-of-network visits, less money was coming in. On top of that, the ACA has a penalty for physician-owned hospitals, and requires for-profits like Forest Park to pay taxes. Not-for-profit systems like Baylor and Parkland don’t have to.

“So it was a lot of things coming together at once,” Goodman says. “Also, the people involved were physicians and it didn’t seem like they had that business person to guide them.”

Today, the Dallas hospital is closed, and some employees say they haven’t received pay in months. The Frisco, Fort Worth and Southlake hospitals have either filed for chapter 11 bankruptcy or defaulted on loans. Forest Park’s San Antonio hospital is closed and employees there have filed a class action lawsuit.

For patients, though, this is not a huge deal.

“There’s no shortage of options,” Allan Baumgarten, a financial health policy analyst in Minnesota says. “And presumably most of the doctors that were at Forest Park, also have admitting privileges at other local Dallas area hospitals.”

Baumgarten says while shutting down a hospital and filing for bankruptcy is a big deal, it’s very likely that some of Forest Park’s hospitals could be bought by another larger hospital system with a different management approach.

He says what happened with Forest Park reminds him of what happened when Krispy Kreme opened up a handful of shops in the Twin Cities a few years back.

“There was a huge amount of buzz, there were reports about cars lining up blocks long to get Krispy Kreme donuts and after a few months the excitement died out, within about two years, all four stores had closed.”

The Forest Park hospitals were also bright and shiny – they even smelled good. But, like Krispy Kreme donuts, they had a hole in the middle that left them vulnerable to collapse.