COMMUNITY RALLIES TO BUY HOSPITAL FROM COLUMBIA;BOND INITIATIVES, BUSINESS SUPPORT AND DETERMINATION HELP SMALL LA. TOWN TAKE OVER HOSPITAL, EXPAND SERVICES
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October 14, 1996 01:00 AM

COMMUNITY RALLIES TO BUY HOSPITAL FROM COLUMBIA;BOND INITIATIVES, BUSINESS SUPPORT AND DETERMINATION HELP SMALL LA. TOWN TAKE OVER HOSPITAL, EXPAND SERVICES

J. Duncan Moore
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    Even as big investor-owned hospital companies are deepening their roots in rural America, one town has plucked its hospital off the for-profit tree and grasped an alternative future.

    Townspeople in Ville Platte, La., population 11,000, have just bought their hospital back from no less than Columbia/HCA Healthcare Corp., the nation's largest for-profit chain, which is making stronger overtures to rural hospitals (See related story, p. 49).

    They not only outdueled Columbia, but they converted the hospital to a not-for-profit institution, expanded the hospital's programs to meet local needs, created a hospital district and voted to tax themselves if necessary.

    "We defied the industry," said Linda Deville, chief executive officer of Ville Platte Medical Center. "If our trends in the last three years continue, with the community support, we feel like we will be very successful."

    From Columbia's standpoint, too, the deal was a winner. The company had never done a spinoff like this.

    "Our relationship with that district is very good," Nashville spokesman Jeff Prescott said. "There's been a great deal of discussion with them." Columbia would not hesitate to do such a deal again if the right circumstances existed, he said.

    On Sept. 1, Ville Platte officials took control of their hospital from Columbia. They paid $10.8 million for it, raised through a variety of bonds and financing instruments stitched together by doctors, businesses, bankers and local voters.

    "This is one of the happy events in hospitals today, as far as I can see," said John J. Burdin Jr., CEO of Lafayette (La.) General Medical Center, which helped in the transition.

    Gregory Ardoin, M.D., an internist and pulmonologist at Ville Platte, thinks it has national implications. "I wish the rest of this country would follow suit," Ardoin said. "I think that's the answer to solving this healthcare problem."

    But no one should expect it to be easy. The Ville Platte people found Columbia to be a formidable negotiating partner, one that forced them to return repeatedly to the bargaining table (See related story, p. 50).

    Ville Platte Medical Center has 124 beds, 250 employees and had 2,760 acute-care admissions in 1994. Built in 1974 by Humana, it is the only hospital in town. Humana unloaded it as part of its 1993 spinoff of hospitals into Galen Health Care. Columbia acquired Galen soon thereafter.

    Columbia's subsequent acquisition of Healthtrust in 1995 brought the company its second hospital in Evangeline Parish, Savoy Medical Center in nearby Mamou, La. The Federal Trade Commission told Columbia to divest Ville Platte as part of its antitrust clearance of the Healthtrust deal.

    "Our doctors said, `If one has to be sold, can we be sold and look into community ownership?"' remembers Deville. "Columbia said, `Hey, why not? We'll give you that option."'

    Then began a period of long days and longer meetings for the ad hoc committee created to buy the hospital. The committee members needed to raise millions of dollars fast with no assets or revenue stream. They found a bond counsel who advised them that bonds could be sold, but it would probably require taxpayer support and, therefore, a special election.

    Local businesses, political leaders and voluntary groups formed a broad coalition behind the proposal. An understanding emerged that if the hospital was closed, it would not only deprive the town of its local healthcare base but would hurt economic development efforts. A possible sale to another investor-owned operator wasn't much more appealing, they said, because townspeople were skeptical that a large corporation would invest the money needed to make the hospital grow.

    "With all the changes in ownership, the way the industry was going, we didn't know what was going to happen," said Bob Manuel, president of the Evangeline Parish Police Jury, which functions as a county council. "We felt one way to secure it and be certain of its growth and longevity was to buy it out. A door opened and we took advantage."

    The police jury created a special hospital district, comprising half the parish and including about 18,000 people. It appointed the district board.

    The hospital district needed voter authorization to issue $7.1 million in general obligation bonds. On Sept. 9, 1995, the hospital district scheduled an election to decide whether the people would tax themselves to support the hospital if it could not meet its note payments.

    In Louisiana, the first $75,000 of assessed value on residential property is exempt from property tax. That means business shoulders the burden. "Industry will pay taxes if we go under," Ardoin said. "So industry will have to support us. We're in a solid position."

    The ad hoc committee put together a grass-roots campaign to pass the bond issue. Volunteers donated $1,000 for expenses. Girl Scouts and 4-H members knocked on doors and passed out fliers. Businesses inserted a reminder to support the vote in their billing statements. The hospital's 250 employees were asked to tell 10 friends and family members to vote.

    On election day 10% of the electorate turned out, high for a one-question ballot. The question passed with 87%.

    The hospital district owns the building, land and equipment. A not-for-profit corporation, Ville Platte Medical Center Inc., was created to lease the property and operate the hospital.

    Next, revenue bonds for $1.9 million were obtained through the Agriculture Department's Rural Economic Development Agency. Those bonds are backed by the hospital's revenues.

    The ad hoc group had negotiated a price of $8 million for the hospital's plant, equipment and land. To buy the working capital, accounts receivable and inventory, the group agreed to pay Columbia a further $2.8 million.

    A working-capital loan of $4 million was arranged through all four of the local banks, each of which wanted to support the project. That loan is 80% guaranteed by the federal government.

    The 87% approval on the hospital bonds showed that locals understood the importance of keeping the hospital.

    It gave the ad hoc group the muscle it needed to continue the fight. The need was especially keen for local businesses. Bill Guidry is human resources manager for Cooper-Cameron Corp., a maker of oil-field equipment and the biggest employer in town. Cooper-Cameron has 450 workers, 350 of whom live in the parish.

    "We want to provide the best healthcare available for our employees. Also for any injuries or accidents, we want a quality hospital to get our people treated in a timely manner," he said.

    Cooper-Cameron encouraged its employees to vote for the bond issue. "We try to attract quality professionals here," Guidry said. "One of the things that sells our company...is our medical plan and nearness of the hospital and the quality of care they get." If the hospital had closed, "it would have affected our recruitment," he said.

    Ardoin feared that "Columbia wanted to shut down our hospital and centralize at Savoy in Mamou. There's no doubt in my mind that was the plan."

    Ardoin argued with the Columbia people, telling them if they closed the hospital, their market share would plummet because Ville Platte people would not go to Mamou. The town is oriented by highway connections to Lafayette and Opelousas.

    Columbia's Prescott said the company didn't have the option of closing Ville Platte, since the FTC had ordered it to sell the hospital.

    Ardoin casts the situation in terms of the for-profit, not-for-profit debate. He moved back to his hometown in 1990 after getting his medical training elsewhere, only to discover that "the community was not being served by the hospital." Humana had "never made a capital improvement," he said. "It had no home health, no significant outpatient services."

    Humana told the townspeople that the hospital was not profitable and that "we were fortunate they continued to string us along," he claimed.

    But when Ardoin and the ad hoc group examined the books, they found that "over recent years it was extremely profitable," he said.

    According to HCIA, a Baltimore-based healthcare information company, Ville Platte made money in 1992 and 1994 but lost money in 1993.

    In 1994, it had net income of $764,000 on $15 million of net patient revenues, an operating profit of 5.1%.

    Numbers are not yet available since the handover a month ago, but for the first seven months of 1996, Deville said the hospital earned $1.7 million before depreciation and income taxes.

    It was able to turn in such a performance because during the year-and-a-half of protracted negotiations, the community behaved as though it already owned the hospital, she said. In that time, the hospital grew 20% in volume. Occupancy is now at 43%, Deville said; in 1994, HCIA reported it was 27%. Deville, who has worked at the hospital since 1976, became CEO in March 1995.

    The hospital's results were aided by the arrival of nine new physicians to the area, four of them full time. Five are specialists who come one day a week for clinics and surgeries. The town now enjoys the services of an ear, nose and throat doctor, a gastroenterologist and an ophthalmologist. "Those services were not available before," Deville said. "In Columbia days, they directed patients to Alexandria," where Columbia operates a tertiary center, Rapides Regional Medical Center.

    Over the past year, Ville Platte added several new programs, including home health and geriatric psychiatric.

    It also started a corporate wellness program. That was one of the things that encouraged local businesses to back the community takeover.

    None of this would have happened without the tenacity and determination of the local community, Burdin said. Now comes the hard part: to operate in an increasingly challenging environment.

    "They're much like the dog that caught the carp," Burdin concluded in his Cajun twang. "He has to figure out how to eat that damn sucker."

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