MedCath’s rise and fall a reflection of the changing realities of a fickle healthcare market

September 14, 2011 – 12:13 PM | By Holland Johnson | No comments yet

Back in the early days of Medical Device Daily – in fact, it might even have been in the relatively brief very early period of time when the new publication was known as Medical Device Week – it’s likely that few if any healthcare-related companies got more frequent mention in our pages than MedCath.

Thinking back on that time, it seems like news stories on the high-flying operator of heart-focused specialty hospitals were appearing in MDW and then MDD with amazing regularity. It was “MedCath reported this week plans to open a new hospital in . . .” or “MedCath yesterday opened it’s latest heart hospital in . . .” Go ahead and mentally fill in the location of your choice, if it wasn’t already on MedCath’s list, it soon would be.

Fast forward to today. Founded in 1988, that “high flyer” now is working its way through a fairly lengthy journey toward being dissolved. It has sold several of its hospitals the past year or so, with only a handful remaining as the process moves toward resolution.

So just what happened to the Charlotte, North Carolina-based company? Oh, nothing other than than being smacked upside the head by regulators and taking some substantial hits from that old bugaboo of capitalism known as market pressures. Throw in substantial changes in physician practices and you have the problems that MedCath has bumped up against in recent years wrapped up in one neat little litany.

Shareholders are scheduled to vote on the final liquidation plan for the company at a special shareholders scheduled for Sept. 22. It is a move heartily – pardon the pun – endorsed by MedCath’s board of directors, which, as the old saying goes, sees the company pouring good money after bad. The latest insult is a slight reduction in the per-share amount seen coming from the sale of all remaining assets simply due to the cost of operating as a public company with all the inherent accounting costs.

So what caused the proverbial better mousetrap to end up with not enough sick mice nibbling at too little cheese? The “market pressures” aspect came from the company’s hospitals getting aced out of managed-care contracts in markets where much bigger players – large, multi-hospital systems -took precedence.

Then came changes – really significant changes – in physician practices, with many of the cardiologists who had used the MedCath facilities and who liked the clinical appeal of the specialized hospital model deciding to instead cast their collective lots with the larger, all-encompassing, acute-care hospital systems.

There went the cardiologists, many of them with well-earned reputations built over some years of accomplishment. There went the cachet that went with those names, a cachet MedCath played on in touting its facilities and service offerings.

As for the previously mentioned regulatory hurdles, those have been exacerbated by the federal healthcare reform legislation, which places limits on the growth of doctor-owned hospitals. That’s a “final nail in the coffin” kind of thing among the factors leading to MedCath’s pending final liquidation.

MedCath has seen the handwriting on the wall for several years, and to its credit has sought to diversify its offerings, but it has lastingly been linked with cardiology. And it has done that quite well, winning considerable praise for the quality of its work in a widely disparate set of markets.

The company’s executives and directors would have preferred selling the company as a whole, but the aforementioned factors have made that pretty much an impossibility. Thus the ongoing sale of assets, which is approaching its final stages.

At some point in the not-too-distant future, the name MedCath no longer will adorn Medical Device Daily or any other publication. It was an interesting, highly eventful run of relatively short duration – like a spectacular piece of fireworks lighting up the night sky on the Fourth of July.


Medical Device Daily Contributing Writer

(Jim Stommen is the former longtime executive editor of Medical Device Daily. He retired in 2009 and now is a freelance writer focused on healthcare issues.)


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