As it was negotiating a deal with the university hospital in Charleston, S.C., Columbia/HCA Healthcare Corp. drafted but never released a report showing that for-profit hospitals in the market provided more community benefits than not-for-profits, MODERN HEALTHCARE*has learned.
The drafting of the report reveals that Columbia's strategy of discrediting the community work of competing not-for-profit hospitals is alive and well. But in this case, the nation's largest for-profit chain didn't pull the trigger, perhaps because the report wasn't needed at the time.
The report, which was obtained by MODERN HEALTHCARE, is dated November 1995. That was two months after the board of trustees of Medical University of South Carolina entered into exclusive negotiations with Columbia to form a joint venture to operate the university's 582-bed teaching hospital (Sept. 25, 1995, p. 19). The 120-day negotiating period expired in mid-January, and the university board was scheduled to vote on the final agreement on Feb. 9.
Details of the proposed agreement are confidential, a university spokeswoman said last week before the vote.
The university chose Columbia over a not-for-profit hospital partnership that offered the university a competing bid to operate the Medical Center of the Medical University of South Carolina. At the time, Columbia offered the university $8 million annually in lease payments and $90 million for the hospital's assets. The not-for-profit partnership, called Lowcountry Health System, offered $25 million and a share of the profits in annual lease payments and $72 million for assets.
The targets of the criticism of the unreleased community-benefits report were the hospital members of the not-for-profit partnership in pursuit of the university hospital.
Healthcare Management Decisions, a research and consulting firm based in St. Petersburg, Fla., prepared the report for Columbia. Healthcare Management Decisions has done similar reports for Columbia in other markets in which the chain is pursuing a hospital or service contract.
The firm compared the community benefits provided in 1994 by seven Charleston-area hospitals, excluding the university hospital. Four of the seven were for-profits; three were not-for-profits.
Hospitals in the report were credited with charity care and taxes paid. But deducted from that amount were Medicaid disproportionate-share payments and taxes avoided or not paid. The report then expressed those community benefits as a percentage of annual operating expenses and other variables.
Not surprisingly, using that methodology, the for-profit hospitals grabbed the first four spots in the rankings.
For example, Trident Regional Medical Center, which is owned by Columbia, devoted 16.4% of its operating expenses to community benefits, while Roper Hospital, the lead hospital in the not-for-profit partnership, had a negative ratio of 5.8%. The report credited Trident with total taxes paid of about $10.5 million in 1994, while it deducted $10.2 million in community benefits from Roper for taxes not paid.
However, Roper incurred charity-care costs of $2.1 million in 1994 compared with $1.7 million for Trident.
When MODERN HEALTHCARE*ranked the seven hospitals based on charity-care costs alone as a percentage of operating expenses, the for-profit hospitals still held three of the top four spots, but the differences between for-profit and not-for-profit hospitals in the study were much smaller.
Ray Greenberg, M.D., vice president for academic affairs at the university, heads the four-member negotiating committee that's dealing with Columbia, and he said he was unaware of the community-benefits report. Consequently, the report has had no bearing on the work of the committee, he said.
"It hasn't entered into the negotiations, but that doesn't mean Columbia hasn't used the same data to make decisions about what they can afford to do," Greenberg said.
James Rogers, president and chief executive officer at Roper Hospital, also said he was unaware of the report.
"I haven't seen it, but it doesn't surprise me," he said. "Columbia has done this kind of thing before."
Rogers said he doesn't put too much faith in the report, saying the findings are dependent on the methodology, and the methodology is stacked against not-for-profit hospitals.
"A lot of things we do for the community won't show up in a report like that," he said. "I'd sit down with all the hospitals in town and go through an audit. I'll live with those results."
Frank DeMarco, who heads Columbia's Carolinas division, didn't respond to an interview request.