It's a lobbyist's dream: a story guaranteed to boil the blood of frustrated hospital administrators and move outraged lawmakers to legislative action.
Unfortunately, a "horror story" of wayward antitrust regulation cited recently on Capitol Hill by industry lobbyists and lawmakers appears to be a far more complicated tale than advertised.
MODERN HEALTHCARE traced the anecdote to a West Virginia hospital executive who's been accused of seeking antitrust relief to develop a two-hospital network that would exclude the market's third hospital. That facility is owned by Columbia Healthcare Corp.
But the tale of how the threat of an antitrust suit chilled hospital collaboration in West Virginia has been accepted at face value by several federal lawmakers. They've used the story to justify federal legislation that would give hospitals antitrust exemptions for certain joint activities. In fact, the American Hospital Association had a participant in the drama testify on the organization's behalf before Congress.
"If this is being used as a tool in Washington, that's too bad. The scenario does not exist," said Barry Papania, executive director of 79-bed St. Luke's Hospital in Bluefield, W.Va.
AHA executives contacted by MOD-ERN HEALTHCARE say the association is sticking to its story, although Mr. Papania said the AHA never contacted him.
St. Luke's is one of two hospitals in Bluefield, a town of about 13,000 located on West Virginia's southern border with Virginia. Columbia Healthcare owns St. Luke's, which was formerly owned by Galen Health Care.
The other hospital in Bluefield is 265-bed Bluefield Regional Medical Center, a not-for-profit facility. About 15 miles northeast of Bluefield Regional is Mercer County's third hospital, 188-bed Princeton (W.Va.) Community Hospital, which also is a not-for-profit institution.
Here's the story according to legislative aides for Sen. Orrin Hatch (R-Utah) and Rep. Bill Archer (R-Texas). In November, Messrs. Hatch and Arch-er introduced bills that would give specific collaborative ventures by hospitals and other providers antitrust exemptions (Dec. 20/27, 1993, p. 3).
In reciting a list of ventures that have been chilled by antitrust, one aide told of a group of rural West Virginia hospitals that tried to form a provider network but were stopped by the Federal Trade Commission. The other told of an attempt by a group of rural West Virginia clinics that tried to affiliate with a tertiary-care hospital but were stopped by a threatened lawsuit from a competing hospital.
Attempting to clarify the story, MODERN HEALTHCARE contacted the AHA, which said the situation involved the three hospitals in Mercer County.
The situation was described to Congress on two separate occasions last year by Eugene Pawlowski, president of Bluefield Regional. He testified before Congress on the ills of antitrust and the benefits of collaboration. On May 7, he testified on the AHA's behalf before the Senate Finance Committee's subcommittee on Medicare and long-term care. And on July 13, he testified before the House Ways and Means health subcommittee as a representative of a state commission in West Virginia studying healthcare reform.
At both hearings, Mr. Pawlowski told of an attempt by his hospital and Princeton Community to engage in collaborative ventures that eventually could lead to a merger. He said those talks broke off after the county's third hospital, St. Luke's, threatened to file an antitrust lawsuit not only against the other two hospitals but against their executives as well.
Mr. Pawlowski told MODERN HEALTHCARE that the threat by Mr. Papania occurred in March during a public presentation of a consultant's report on network formation in Mercer County.
Mr. Pawlowski produced a copy of an Oct. 18 letter to William Sheppard, Princeton Community's CEO, in which he recounts the warning: "Our efforts were stalled earlier this year when Barry Papania, administrator of St. Luke's Hospital, verbally threatened you by using existing antitrust laws to prevent further discussions."
Mr. Pawlowski said talks between Bluefield Regional and Princeton Community are expected to resume laterContinued on p. 24
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Continued from p. 22this month after last fall's release of the government's new healthcare antitrust enforcement guidelines (Sept. 20, 1993, p. 3). He said the guidelines, which outlined "safety zones" of provider ventures, created a greater comfort level under which talks could occur. He said Princeton Community was waiting for clearance from its attorney.
"I never had a conversation with Bill Sheppard where I threatened antitrust," Mr. Papania said. "I don't know where he (Mr. Pawlowski) comes off saying I did."
MODERN HEALTHCARE gave a copy of Mr. Pawlowski's Oct. 18 letter to Mr. Papania. Mr. Papania said he was unaware of the letter and of Mr. Pawlow-ski's contention that he threatened to sue Bluefield Regional and Princeton Community if they collaborated.
"No one called from Washington to find out if the story was fact or fiction," Mr. Papania said.
Even Mr. Sheppard interpreted Mr. Papania's comment differently.
"What Barry said was, `You guys do that and Columbia will sue,'|" Mr. Sheppard told MODERN HEALTHCARE. "He said it as a matter of fact, not a threat. It had nothing to do with shared services or a merger involving Bluefield Regional and Princeton Community."
The subject of Mr. Papania's comment was the controversial recommendation contained in the consultant's report on network formation.
In the report, the consulting firm, Rosenberg & Associates, recommended that Bluefield Regional and Princeton Community form a two-hospital network and divide up specific medical services between the two facilities. Bluefield Regional co-sponsored the report along with the state health department and planning commission.
Both Mr. Sheppard and Mr. Papania said the report raised two obvious is-
sues. First, it excluded St. Luke's from any network in the market. And second, plans by competitors to divide up services or markets-dubbed allocation schemes-are automatic violations of federal antitrust law.
"His report recommended carving up the business in the county|.|.|.|.|We'd need antitrust protection if we wanted to do that," Mr. Sheppard said.
"What Gene (Mr. Pawlowski) is trying to do is lock me out of the network. They never included us in the report," Mr. Papania said. "He's bent out of shape because of Columbia."
Last year, Columbia approached Bluefield Regional about possibly acquiring the hospital, but Bluefield rejected the offer (Dec. 6, 1992, p. 3).
Mr. Pawlowski said the consultant's report left out St. Luke's because it's a for-profit, chain-operated facility, and it's much easier for two not-for-profits to collaborate because of their common missions and community governing boards. He maintained that the report wasn't a deliberate effort to exclude St. Luke's from any network in the market. In fact, he said, "If Barry wants to work with us, that's super."
Interestingly, antitrust doesn't appear to be an obstacle when the hospitals want to collaborate to save money.
For example, Bluefield Regional and Princeton Community are in the final stages of developing a joint laundry service. They've also discussed the possibility of consolidating their purchasing and accounts receivable activities. And all three hospitals are discussing the construction of a jointly owned fixed magnetic resonance imaging facility.
But the AHA maintained its position.
"We're standing by what we originally said," said Gaelynn DeMartino, the AHA's Washington counsel. "To our knowledge, the two hospitals had a way to save money and, because of the threat of a lawsuit, they did not proceed."-David Burda