A battle of medical superpowers is shaping up in Houston, where a judge last week said Columbia/HCA Healthcare Corp. can negotiate with St. Luke's Episcopal Hospital.
The quickly escalating animosity between St. Luke's and its landlord, Texas Medical Center, will culminate July 29 with a trial on whether St. Luke's can enter a deal with the nation's largest healthcare chain.
A joint venture with St. Luke's would be prestigious for Columbia, which owns 19 hospitals in the Houston area but lacks a presence in the renowned Texas Medical Center. St. Luke's is widely recognized as a premier heart center, where noted surgeon Denton Cooley practices.
St. Luke's officials presented Texas Medical Center executives with details about a possible transaction earlier this month. Texas Medical Center is a 675-acre complex south of downtown Houston. Since 1946, the center has given land to not-for-profit institutions. For-profit organizations, however, cannot reside on medical center land.
According to court documents, the medical center's board voted May 6 to declare that a Columbia/St. Luke's combination would violate its restrictions. Despite that vote, St. Luke's board voted May 9 to approve the proposed transaction, the documents reveal.
The same day, Texas Medical Center officials commissioned John Hill, a former state Supreme Court justice, to take the matter to court. Hill obtained a temporary restraining order to stop discussions between St. Luke's and Columbia.
Last week, a state court judge ruled that the two parties can continue discussions. Meanwhile, St. Luke's attorney obtained an order to move the case to federal court, based on federal freedom-of-speech arguments. Texas Medical Center's lawyers are trying to move the case back to state court.
The lawsuit contains details about Columbia's proposed venture with St. Luke's. Such information typically is not disclosed.
According to the court documents, St. Luke's is talking to Columbia about forming three management service organizations that would be joint ventures between the two parties. The largest MSO would be a for-profit organization that would manage the operations of Columbia's 19 Houston-area hospitals and St. Luke's. Those operations generate about $2 billion in annual revenues.
Columbia would have 80% of the directors on the MSO board; St. Luke's would have 20%.
However, St. Luke's four top executives, including its president and chief executive officer, Michael Jhin, would be "leased" to the MSO.
This arrangement would mean St. Luke's would be "used directly and indirectly for private gain," which violates Texas Medical Center covenants, the center claims.
The second joint venture would manage outpatient and physician practices for St. Luke's and Columbia. The third joint venture would do managed-care contracting.