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million. On July 23, 1985, AMH entered into a contract for the
sale of the hospital's operating assets for $29,587,000 to AMISUB
(Anclote), Inc., a subsidiary of American Medical International,
Inc. (AMI), a large health care provider. At this time, the
hospital was operating at 130 beds and had a certificate of need
for an additional 36 beds. Of the total purchase price, the
parties agreed that $3,500,000 was to be placed in escrow to be
used for expenses related to the transfer of the 36-bed
certificate of need, and that the remaining balance would be
released to AMH only if a certificate of need for all 36 beds
were approved, otherwise the remaining amount would be prorated
based on the number of beds approved. The closing date was
October 21, 1985. In 1990, AMI sold the hospital for about
$4,276,000.
Regulatory Environment
The State of Florida Department of Health and Rehabilitative
Services was the granting authority for the license to operate
the hospital and the certificates of need. The hospital's
patient revenue and cost charges were subject to review by the
State's Hospital Cost Containment Board.
On September 3, 1982, Congress enacted the Tax Equity and
Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, 96
Stat. 324. TEFRA sec. 101(b)(3), 96 Stat. 335, provided in part:
The Secretary [of Health and Human Services] shall
develop, in consultation with the Senate Committee on
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