In 2014, the Walnut Hill Medical Center looked like a jewel kept inside a sock. Inside the drab brown building at the corner of Greenville and Walnut Hill was one of the nation’s most upscale hospitals: A $100 million, 100-bed totem to patient comfort, complete with state-of-the-art medical technology for doctors, and chef-cooked meals and private rooms for the patients. It sat catty-corner to the competition: Texas Health Presbyterian Dallas, the very type of large, system-owned facilities that Walnut Hill’s founding doctors had wanted to get away from.
It certainly made the narrative an easy one for the founders, who were, by and large, a group of passionate doctors fed up with the bureaucracy and administrative demands at hospitals owned by huge systems like Baylor Scott & White, Texas Health Resources, and HCA. So they decided to start their own. They fully renovated an eight-story, 1980s-era building that stared north at the lush greens of Lake Highlands and beyond. It was part of a wave of upscale hospitals that thought amenities and comfort and a broad service line would attract a steady stream of patients that could keep the hospital afloat. Not so.
Just under three years after opening its doors, the hospital declared bankruptcy. Healthcare reporter Olivia Nguyen’s final story for D CEO chronicles what sunk the high-end hospital, and it’s online today.
The founders certainly thought they could make it work. Its business model was structured as such to avoid the problems that befell its physician-owned competitors. Federal law prevents hospitals where practicing physicians have a financial stake in the operations from seeing Medicare and Medicaid patients, a critical population that help can shore up revenue should privately-insured patients not show up in droves.
And so Walnut Hill’s doctors invested in the real estate and received a flat fee, freeing the facility to see publicly insured patients. This was one of the factors that killed the similarly upscale Forest Park Medical Center chain, which couldn’t see those patients and was also beset with an alleged fraud scheme.
So: What’s this all mean? It’s yet another sign that independently-owned, full-service hospitals won’t be able to compete in a system’s world. Walnut Hill, for all its high-thread count bedsheets and private ICU rooms and floor-to-ceiling windows, couldn’t bring in the volume necessary to keep its doors open. Whatever your opinion is on Walnut Hill, it’s another sign that there’s less and less room for scrappy upstarts to try something new in a healthcare industry that’s growing more expensive by the day.
Read the full D CEO feature right here.
