AMI Inc., a Dallas-based international hospital chain, said last week it planned to sell its 250-bed Doctors Hospital in Lanham to a newly established, non-profit corporation, leaving only one private, for-profit hospital in Maryland.
The sale, the latest turn of events in the hospital's sometimes troubled 15-year history, comes as owners who paid $1.67 billion last year in a debt-driven takeover of AMI seek to shed some of their debt by selling a dozen of AMI's 53 hospitals across the nation.
The change in ownership here, to be financed by a $49 million bond sale to institutional investors, will have little if any direct impact on patients, physicians or residents in Prince George's County.
Hospital executive director Philip B. Down, who also is chairman of the board of the new corporation, said that stringent state regulation of rates in Maryland prompted AMI to sell Doctors Hospital, although he noted the facility's occupancy rate of 76 percent is the highest in the chain.
"With the regulatory environment here, it's a market that really isn't conducive to for-profit investment in a hospital," Down said. Under the Maryland Health Services Cost Review Commission, the $4,115 average cost per admission in the state is seven percent below the national average.
"There is an inherent reluctance for proprietary chains to become involved in states more highly regulated with respect to their rates," said John M. Colmers, executive director of the Maryland health cost review panel.
But the same regulatory climate that has prompted AMI to sell should make the bonds attractive to investors, Downs said, because the state sets rates that allow the hospital to pay its expenses, including financing costs.
Of the revenue raised by the bonds, $30 million will be applied to the purchase of the present facility, $6.3 million to future purchase of hospital equipment, $10.7 million to working capital and future interest payments and $1.5 million to cover attorneys' fees and other expenses related to the bond sale.
With the sale of Doctors Hospital to the non-profit corporation expected this month, the only remaining for-profit hospital among the 51 acute-care facilities in Maryland will be the Southern Maryland Hospital Center in Clinton.
The last two Maryland hospitals to give up their for-profit status were Fallston General, in Harford County in 1986, and Clinton Community, which closed last year. Its beds are being transferred to a new hospital being built in Fort Washington by the Greater Southeast Community Hospital. AMI purchased Doctors Hospital on June, 1985 from Dr. Leon Levitsky, who founded the facility on Good Luck Road near the Capital Beltway.
Levitsky was often in conflict with the Maryland cost review panel, which alleged that the hospital systematically overcharged patients a total of $18 million. The panel's charges were upheld by the courts. The hospital under Levitsky then filed for bankruptcy in 1984, contending it would have to slash its daily room rate by $80 to pay back the overcharges. The courts rejected that claim.
As part of its purchase agreement, AMI assumed the debts arising from the obligation to repay the overcharges. The amount is being repaid to insurance carriers, Medicare and Medicaid through lower rates over a six-year period, which runs through 1991. The non-profit corporation will continue to charge lower rates to make up for the overcharges.
Under AMI ownership, Doctors Hospitallost $5.8 million on revenue of $44.2 million for the year ending June, 1989, the latest figures available. Under non-profit ownership, Downs said, such losses should cease. "What we are going to accomplish is the removal of the AMI debt load and corporate overhead," Downs said.