An Arkansas hospital has charged its local competitor with predatory pricing in a battle over a state Medicaid contract to provide obstetric services.
AMI National Park Medical Center, a 145-bed hospital in Hot Springs, argued that its rival intended to hurt AMI National's ability to compete when it bid below cost for the Medicaid contract. In February, AMI National asked the Garland County Chancery Court to block the contract, contending the bid violates Arkansas' Unfair Practices Act.
This month, the competitor, 274-bed St. Joseph's Regional Health Center in Hot Springs National Park, filed a countersuit, arguing that hospitals throughout the state, including AMI National, also bid below cost for the Medicaid contracts.
Hearings on the suit haven't been scheduled.
Arkansas sought bids for the first time this year for its Medicaid obstetrics business in six counties where hospitals have competing programs. On Feb. 1, it told the lowest bidders in four counties they would provide all inpatient obstetrics care and routine newborn services to Medicaid patients in their areas. No bids were submitted in two counties.
The state estimates that the new contracts will cut about $8 million from the $20 million it now spends each year for deliveries and routine nursery services.
However, it has yet to win permission from HCFA to implement the program. HCFA has until May 2 to respond to Arkansas' request for a waiver from standard Medicaid regulations.
St. Joseph's and AMI National are fighting over the obstetrics contract in Garland County, where Medicaid pays for about half of the area's 1,200 annual births. St. Joseph's bid-$192 per diem-is the lowest in the state by $96. AMI National's bid, the only other offer for the Garland County contract, was the third-lowest at $318 per diem. The average bid submitted by nine hospitals in the four counties was $390.
"The key here is that their bid was so far out of range," said Jerry Mabry, AMI National's chief executive officer. "We felt that the $318 bid was a solid business bid, and we felt that below that point it would jeopardize other services."
Currently, AMI National and St. Joseph' each provide services for about 600 births annually. In each hospital, Medicaid patients account for half the births.
If St. Joseph's didn't win the Medicaid contract, its obstetrics business would fall to about 300 births annually, which wouldn't pay for its new 15-bed family-centered obstetrics unit, said Randall Fale, St. Joseph's president and CEO. The hospital will lose money on the contract, but it would lose more without it, Mr. Fale said. He declined to estimate losses.
The bid was not intended to be anti-competitive, Mr. Fale said. "Given the hospitals faced the same circumstances in the Hot Springs area, we are surprised that AMI didn't submit a competitive bid," he said.
Mr. Fale contended that AMI National bid below cost. Mr. Mabry said the business brought in by the contract would cover AMI National's cost. It now must recruit more privately insured patients, but it will keep its obstetrics unit open, he said.
The two hospitals have fought over obstetrics before. St. Joseph's opened a new $55 million hospital in December 1991. It delayed the opening of its obstetrics unit, then a new service, for a year so AMI would drop its opposition to St. Joseph's certificate-of-need application.