RADFORD, Va.-Competing certificate-of-need applications to build a new hospital here are pitting the not-for-profit and for-profit ownership sectors in the state against each other.
Depending on who wins and whose rhetoric is believed, the market may fall to a dominant system or continue to suffer from overbedding.
The not-for-profit player is Radford (Va.) Community Hospital, owned by Roanoke, Va.-based Carilion Health System. The for-profit players are Pulaski (Va.) Community Hospital and Montgomery Regional Hospital in Blacksburg, Va., both owned by Columbia/HCA Healthcare Corp.
The debate centers around who will build a new hospital to replace Radford Community's 54-year-old facility.
Radford Community, understandably, wants to replace itself. It wants to do so with a new 97-bed facility on 110 acres just outside of Radford. The site is about four miles from the existing hospital, which is licensed for 148 beds. The 235,000-square-foot replacement facility would cost $60 million to build and employ 530 full-time-equivalent workers.
The competing plan, offered by Pulaski and Montgomery, would construct a 50-bed, 108,000-square-foot hospital within the city limits at a cost of $26 million. It would employ 237 FTEs.
Pulaski would contribute 25 of its 91 licensed beds to the project. Montgomery would give up 25 of its 104 beds.
Both parties agree that the market is overbedded. The acute-care occupancy rate for Radford Community was 47% in 1993, according to HCIA, a Baltimore-based healthcare information company. Pulaski's and Montgomery's occupancy rates were 49% and 44%, respectively.
Pulaski and Montgomery jointly filed their CON application with the state health department on June 30. Radford Community followed suit on July 5.
Radford's intentions were known to the community, which learned of the hospital's replacement plans in a May 31 announcement. But the CON application offered by the for-profit facilities was a surprise.
"We were surprised that they would file a competing application because we don't think there's any basis for doing it," said Lester "Skip" Lamb, president at Radford Community.
That's just the start of the battle that has ensued over which proposal would benefit the New River Valley more.
Radford Community, which plans to remain open at its present site if the Pulaski-Montgomery plan is approved, claims the two Columbia facilities are mimicking the parent corporation's nationwide strategy of dominating local markets.
The two facilities originally were owned by Healthtrust, which was acquired by Columbia in April.
"If they should be granted the certificate of public need, and over a period of time drive us out of business, they would have a monopoly in the New River Valley," Lamb said.
Montgomery and Pulaski say their plan would not lead directly to Radford Community's closing.
Contention exists over which new facility would contribute more financially, since one competing proposal would produce a for-profit hospital and the other would give rise to a not-for-profit facility.
In addition, the proposed locales, Montgomery County and the city of Radford, are separate entities.
"Our proposal would be adding to the city of Radford's tax base and helping to develop the infrastructure of the city itself," said Kevin Meyer, director of marketing at Pulaski. "By our choosing to be in the city, the city would benefit from tax revenues and the county would get nothing.
"Radford's move, in addition to moving the facility to outside of the city, would also be removing 110 acres of real estate tax rolls from Montgomery County," Meyer said.
Estimated contributions in tax revenues to the city from Pulaski-Montgomery's proposed facility would be in excess of $200,000 annually, he said.
Radford Community maintains that its expansion into an undeveloped region called the Gateway will give the area an economic boost. The hospital has agreed to pay for the extension of sewer and water lines into the area, an investment the hospital says will spur further growth.
Through a tax-sharing agreement already in place, the city would get 27.5% of tax revenues produced by development, even though the area is not within city limits. Montgomery County would get the remainder.
In the past, Radford Community has surpassed the other two hospitals combined in charity care. In 1993, Radford Community reported $1.4 million in charity care, compared with about $320,000 for both for-profit facilities, according to the Virginia Health Services Cost Review Council. That represents 2.3% of Radford Community's gross revenues and 0.4% of the combined gross revenues of Pulaski and Montgomery.
Radford Community has determined that the $15 million to $20 million it would cost to renovate its existing building would not be worth it. Its proposed new hospital would duplicate existing services, devoting half its resources to outpatient care, Lamb said. This spring, Radford Community's outpatient revenues surpassed its inpatient revenues for the first time.
Lamb called the Pulaski-Montgomery proposal "a 50-bed, stripped-down version of a hospital."
The Pulaski-Montgomery hospital also would downplay inpatient care. "The facility is designed to facilitate growth in the outpatient market," Meyer said. He said the planned hospital eliminates duplication of services, such as obstetrics and cardiac catheterization, which the two hospitals say are low-volume in the area.
The two factions have disputed rumors that Columbia and Radford Community, or its parent company Carilion, had been in purchase negotiations. Those talks amounted to "an offer to negotiate which was quickly squelched," Meyer said. Lamb said a sale of Radford Community to Columbia was never considered, nor would it become an option.
Pulaski won a smaller battle with Radford Community last March when it scored approval for a $3.6 million cancer treatment center.
In the current situation, the CON process could take as long as two years. "The more competition and objection you have, the longer it takes," Meyer said.