by Jim Harris
Posted 12/29/1997 12:00 am
Updated 2 years ago
However, when the health care powerhouse imploded beginning in late July amid a federal investigation of its business practices, the resulting effect felt in Arkansas was the company's sudden exodus.
Columbia, whose strategy over a three-year period moved from a predatory takeover stance to partnerships and, in 1997, to a planned system of smaller hospitals in suburban and rural areas of the state, finally gave up the ghost by agreeing to sell its flagship facility, Doctors Hospital in Little Rock, to the parent company of nearby rival St. Vincent Infirmary Medical Center for an estimated $120 million.
Doctors Hospital, feeling the crunch of losing managed care contracts, not to mention the competition from St. Vincent and Baptist Medical Center, dropped from a net of $10.9 million to losing $3.8 million in four years under Columbia's ownership.
The Nashville, Tenn.-based Columbia, which shook loose a number of holdings nationwide under a directive of new management after the federal inquiries, also parted with hospitals in De Queen, Hope and Texarkana and ended a 50-50 partnership with Medical Center of South Arkansas in El Dorado.
Arkansas' health care and managed care market will be left in 1998 to the two massive not-for-profit entities, Baptist Health and St. Vincent, whose statewide development is fueled by publicly traded Tenet Healthcare Corp. and their joint partnership, NovaSys Health Systems. Tenet earlier in '97 partnered with QualChoice of Arkansas Inc., the owner of the University of Arkansas for Medical Sciences health plan, effectively bringing 75 hospitals and 2,000 or so doctors into close proximity.
The coming year figures to feature an escalation of Baptist's and St. Vincent's battle for market control through managed care. St. Vincent fired a shot across Baptist's bow late this year with the purchase of three North Little Rock health care clinics that Baptist had sought for sometime, and both players began setting lines of demarcation in other potential lucrative markets.
The eventual control will be determined by each company's respective managed care connections, which sets up another interesting battle: one of style.
Baptist Health, through its partnership with Arkansas Blue Cross and Blue Shield, is pursuing a single-payer strategy, while St. Vincent/Tenet/NovaSys and that group's diverse managed care contracts has chosen a multiple-payer strategy.
Obviously, both entities believe their strategies are sound. Baptist/Blue Cross believes it can lock up various large employer contracts (teachers, for example) and direct its members to Baptist hospitals and clinics. The St. Vincent group, particularly with the addition of QualChoice, is hoping diversity spells success on the bottom line. Aiding St. Vincent's financial backing is a partnership begun earlier this year by its parent, Sisters of Charity of Nazareth, and Catholic Health Initiatives, the largest Catholic not-for-profit health care organization in the United States.
Based on figures from its health maintenance organization, Health Advantage, filed with the state Insurance Department and with figures released by Blue Cross in the past two years, the Baptist/Blue Cross arrangement doesn't appear to be profitable as its founders hoped in 1993. Health Advantage, which underwent a shakeup of upper management early in 1997, has far more members than the other plans in Arkansas, but in 1996 its expenses outpaced revenue almost 4-to-1.
And it remains to be seen whether Baptist/Blue Cross can maintain the exclusivity approach in an era in which, as one insurer said, "people want choices." Could 1998 see a reversal of the single-payer approach?
Baptist, upset that Prudential Healthcare of Arkansas would open up its preferred provider organization to St. Vincent earlier this year, cut loose its association with Pru effective Dec. 31. Some in the industry believe Baptist/Blue Cross may have to reverse that strategy in 1998 and sign on with other insurers/other providers to enjoy the profits that managed care was supposed to deliver.
The irony of managed care's changes in Arkansas aren't lost on one physician who, asking to remain nameless, said, "Managed care was slow to get a foothold in Arkansas, but when managed care is no longer the big thing on the East Coast or the West Coast, it's now starting to have a big effect here."
Changes in the Offing
Speaking of Pru, its national organization lost millions in 1996 and was said to be a takeover target, most likely United Healthcare Corp. This would reduce the HMO lineup in Arkansas, and that would follow in line with predictions inside the industry three years ago that Arkansas would eventually be served by just two or three HMOs.
Actually, it's looking with Baptist's and St. Vincent's power that the provider networks and the insurers are becoming one in the same.
St. Vincent owns about 30 percent of Healthsource Arkansas Inc. The parent Healthsource was bought in 1997 by Cigna. The Tenet agreement with QualChoice allows St. Vincent the option to buy into that plan as well.
United Healthcare, which grew its Arkansas membership substantially in the past two years, has contracts with the St. Vincent/Tenet/NovaSys network. So does American Health Care Providers, a profitable health plan based in Chicago.
Other Health Care News
Columbia/HCA's wild ride had a similar effect on Southwest Hospital, which expected for eight months to join the Columbia fold. With its future in doubt after Columbia's departure, Southwest was saved by Health Management Associates of Naples, Fla., a growing chain specializing in rural and suburban hospitals. HMA planned a substantial investment in equipment and recruiting doctors to the small hospital.
UAMS opened a new six-story clinical tower costing $55 million and named it in honor of Dr. Harry Ward, the school's chancellor who has directed fund-raising over the past decade that has totaled somewhere in the neighborhood of $150 million.
UAMS's next big venture is the Donald W. Reynolds Center on Aging, which will break ground shortly. UAMS hopes the $25.5 million investment by the Donald W. Reynolds Foundation will propel its geriatric program to among the best programs in the nation.
The Arkansas Heart Hospital opened in March, and hospital officials reported positive financials for the facility owned by a group of Little Rock cardiologists and MedCath Inc. of Charlotte, N.C.
In response to the hospital's opening, both Baptist and St. Vincent began a marketing blitz for their heart care. Baptist bought the rights to a heart-surgery technique known as "port-access," while St. Vincent and UAMS doctors unveiled the "keyhole" method, or minimally invasive direct coronary artery bypass, as a new approach to open-heart surgery.
Beverly Enterprises Inc. had a newsy 1997, selling 49 skilled nursing homes in Texas to Complete Care Services and spinning off its Pharmacy Corp. of America by merging it with Capstone.
In other news:
• Sister Judith Keith left as chief of St. Edward Mercy Medical Center of Fort Smith on July 1.
• A unionization effort failed at St. Vincent.
• The managed care market in Arkansas scared off one plan looking to set up shop when Tri-Point Health Plan Inc. of Nashville decided to wait on plans to enter the state.
• St. Joseph Medical Center of Hot Springs and Hot Spring County Medical Center in Malvern merged, forming Ouachita Area Health Systems.
• Lee Frazier became director of the Department of Human Services. The former senior vice present at St. Vincent directed the Huckabee transition team that reviewed DHS and was part of the Murphy Commission that looked into reinventing the organization.
• Russ Sword resigned as chief of Northwest Health Systems, which includes Northwest Medical Center of Springdale and Bates Medical Center of Bentonville. After overtures from Columbia, Northwest Medical Center turned to Quorum to manage its hospital.
• The state's first specialty independent physicians association was formed by a group of 60 orthopedists led by Drs. Ted Saer, Lowry Barnes and Thomas Frazier.