ANALYSIS

Three years after Baylor Medical Center at Frisco opened, early doctor-investors in the hospital already had potential returns of roughly 10 times their initial investments, according to an analysis by The Dallas Morning News.

When the project was announced in 2000, The News reported, 71 doctors invested a total of $5.2 million for a 60 percent share in what was to be a 10-bed, short-stay surgical hospital, then called the Frisco Medical Center.

The other 40 percent was owned by Texas Health Ventures, a partnership between Baylor Health Care System and United Surgical Partners International, a Dallas-based, for-profit company. Buildings are owned separately and leased to the business.

By the time the hospital opened in 2002, the group of owner-doctors had expanded to 82 and the size of the hospital had increased to 13 beds.

One early doctor-investor paid $45,000 for three shares of the business, according to an appeals court ruling in the doctor's divorce. Based on the initial deal, that represented ownership of slightly more than one-half of 1 percent of the hospital business.

In 2004, according to the court document, those three shares were worth $126,000, and the owner had received at least $36,000 in dividend income related to them, covering much of their original cost. The doctor's former spouse argued the shares were worth at least $500,000. She lost the appeal.

In January 2005, Texas Health Ventures acquired an additional 10.1 percent of Baylor Frisco for $8.8 million, giving it 50.1 percent. That indicates a total value of the business at the time of about $87 million, meaning a half-percent share was worth about $435,000, in line with the divorced spouse's valuation.

On paper then, the stakes of the earliest doctor-investors were worth about 10 times what they paid, not counting dividends already received.

The hospital has expanded several times since. Currently, it has 102 individuals as part-owners. No individual can own more than 2 percent.

In 2008, Baylor Frisco had 68 beds and net patient revenue of $115.7 million, more than double the amount in 2005. It has reported strong net profits from patient services every year since 2003.

Baylor declined comment on the specifics of The News' analysis. But Gary Brock, chief operating officer for the system, cautioned that shares in the hospital are not readily traded like those on a stock exchange. And everyone involved has taken on significant risk, such as the long-term lease.

Still, with revenue and profits growing, there seems to be plenty of opportunity for doctor-owners to eventually cash out with significant profit. Wealth-building advisers call that a liquidity event.