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New Galena hospital works around federal ownership rules - KOAM TV 7

New Galena hospital works around federal ownership rules

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A new hospital in Galena, Kansas works around federal rules intended to prevent conflict of interest in ownership.  City leaders hope the hospital will give a boost to the local economy.

The hospital is set to open next month and will operate in an unusual arrangement to meet federal guidelines.

The new hospital is located near the state line of Missouri.  Doctors with this hospital say one draw for the hospital to be built there is that the state of Kansas has a limit of how much a person can sue for medical malpractice.

Galena Mayor Dale Oglesby hopes other businesses will soon come into town.

Premier Surgical Institute has the ambience of what resembles a hunting lodge, but the independent hospital will have 16 patient beds, an x-ray room, an MRI and four operating rooms.

Its underlying, unconventional business model carries big hopes.

"We think this is the best thing that's going to happen to the city since the mines," says Mayor Oglesby.

Mayor Oglesby says the new Premiere hospital is "technically" owned by the city.

"It's a hybrid agreement that you don't see just everywhere," Mayor Oglesby says.

This agreement involves a group of physicians.

"Back in March of 2010, when President Obama signed his healthcare bill, there's a piece of that legislation that does not allow physicians to own the operations of hospitals," says Premier Surgical Institute CEO Joseph Caputo.  "So when that happened we went out and looked for a partner, and ended up partnering with the city of Galena."

Caputo says 12 doctors took out a line of credit and now own the hospital's real estate.

"The land, the building and the equipment is owned by that group and it is leased to the city for 30 years," says Caputo.

To to meet federal guidelines, "this institution, premier surgical institute, is actually owned by the city of Galena," says Caputo.

The city contracts with a company to manage the hospital.  Money will only come from the hospital, and then filter back.

"The taxpayers aren't paying money because the income derived from performing surgeries, through the healthcare, goes to the city," says Mayor Oglesby.  "So there's a cash flow here and it might be $19 million, whatever that number is, but whatever that number is that's been plugged in, that cash flow actually goes through the city.  The employees that you'll see working out here are actually city employees."

Money from the hospital will also pay the city's outside management firm.

Both the mayor and the hospital's CEO say it'll take about 18 months for the business to break even, although the CEO says as of now, he doesn't know what it's going to take to make a profit.

"Right now we're still developing our staff model, so we haven't come together with what our monthly expenses will be," says Caputo.

In the meantime Mayor Oglesby says the doctors line of credit will cover any possible debt.

The hospital will also fund its own lawsuit insurance.

"Frankly, the best insurance against loss is to have quality care and this is where I think we've got a hand up," says Mayor Oglesby.

Any profit from the hospital will go into the city's general revenue fund.

Joyce Smith, the Director of the Kansas Health Facilities Program, says when it comes to patient health or a hospital's financial stability "I wouldn't say that there is anything any more than what any other privately owned company would be."

The hospital has a board of directors that will report to the city of Galena.

The Kansas Health Facilities Department tells us there are about two other cities in the state that operate hospitals.

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