OrNda HealthCorp's purchase of four-fifths of George Washington University Hospital-the first penetration by an investor-owned chain into the District of Columbia-could speed physician-hospital integration in the nation's capital.
Officials of 280-bed GWU Hospital have signed a letter of intent under which OrNda would invest 80% of the capital necessary either to refurbish GWU's aging hospital or build a replacement. Such a project is estimated to cost $80 million to $120 million.
The partnership also will bring GWU the capital to begin building an integrated delivery system in the district and its suburbs in Montgomery County, Md., and northern Virginia through hospitals with which it already has educational relationships.
That network could evolve through purchases of physician practices, establishment of a primary-care network and affiliations with other hospitals.
The entry of an OrNda-driven system in the relatively disorganized healthcare market in Washington could revive other dormant efforts to organize healthcare delivery in the market, said one local healthcare consultant.
"A situation where you've got a for-profit, corporate approach, particularly with capital, potentially has the ability to come into a market and shake things up, accelerate the pace of change," said Robert Wilson, who leads Arthur Andersen's healthcare practice in the Washington area.
The only other provider aggressively building a physician network in Washington is Medlantic Healthcare Group. Inova Health System in northern Virginia, meanwhile, also has its own network.
Medlantic owns Washington Hospital Center, which leads the market in inpatient admissions, patient days and ambulatory surgery, according to the District of Columbia Hospital Association. GWU is second in admissions, third in patient days and fourth in ambulatory surgeries.
In 1995, GWU Hospital recorded a net loss of $6.3 million on net patient revenues of $171.8 million, compared with a net surplus of $3.2 million on net patient revenues of $188.7 million in 1994, according to HCIA, a Baltimore-based healthcare information company.
As for renovation of GWU's facilities, Allan Weingold, M.D., executive dean and vice president of GWU Hospital, said the estimate of $80 million to $120 million was made when the hospital assumed it would need 350 beds, which it won't need now. He said he believed the cost of rejuvenating the hospital's facilities would be "closer to $80 million than $120 million."
Weingold said the hospital needs to expand operating rooms to accommodate the equipment necessary to perform such complex procedures as neurosurgery. He said the hospital also needs to expand its emergency room, the second-busiest in the city, and change the layout of its critical-care unit so it can operate more efficiently.
The proposed refurbishing raised fears from other hospital executives that such a capital infusion may not be necessary when nearly one-third of the district's hospital beds sat empty in the fourth quarter of 1995.
Announcement of the OrNda-GWU deal came about a week after Tenet Healthcare Corp. announced plans to purchase OrNda. OrNda and GWU officials said Tenet supported the purchase.