A groundbreaking partnership between a Catholic health system and a publicly traded physician practice management company crumbled in recent weeks, spurring a bloody duel over control of their delivery network.
The deal was one of the first attempts to pair a hospital system and a practice management company.
Late last week, Reston, Va.-based PHP Healthcare Corp. acknowledged that it will no longer manage Connecticut Health Enterprise, the network it created with St. Vincent's Health Services in Bridgeport, Conn. Instead, management will be left to the local providers. Last year PHP signed a 10-year agreement to manage the network.
PHP will continue to own 30% of the network, PHP President and Chief Executive Officer Jack Mazur told MODERN HEALTHCARE. "It was always the intention of the parties to create a local management there," Mazur said. "The differences were over the timing."
St. Vincent's would not comment on the matter. The not-for-profit parent of 289-bed St. Vincent's Medical Center is an affiliate of St. Louis-based Daughters of Charity National Health System. Other partners in the network are 289-bed Stamford (Conn.) Hospital and S.S. Cooper, a Daughters of Charity subsidiary.
A power struggle occurred after other CHE members voted to terminate PHP as network manager in November. St. Vincent's sued PHP and sought a temporary restraining order, alleging the company was attempting to shut down CHE so it could start its own delivery network.
Under their 1995 agreement, PHP was precluded from operating a network in Connecticut as long as CHE was in business, according to a complaint filed by St. Vincent's in Fairfield County (Conn.) Superior Court.
Under an agreement worked out last week, PHP will proceed to build a statewide network exclusive of Fairfield County, Mazur said.
St. Vincent's alleged a PHP employee who was in charge of CHE operations, John P. Billingsley, terminated several CHE senior staff members because they refused to pledge loyalty to PHP.
Billingsley, who was no longer working at CHE last week, also allegedly broke off negotiations with potential contracting partners and stated that he was "shutting down" CHE operations.
St. Vincent's and its for-profit management arm, Vincentures, blamed PHP for precipitating a financial crisis at CHE during 1997. It charged PHP with breach of fiduciary duty and violation of the Connecticut Unfair Trade Practices Act.
According to one affidavit, CHE members excluding PHP had invested about $15 million.
PHP filed counterclaims against St. Vincent's, Vincentures, Daughters of Charity, St. Vincent's CEO William Riordan and its chief operating officer, Richard D'Aquila. PHP alleged St. Vincent's schemed to get rid of it after obtaining the benefit of its systems and know-how.
Last week, the parties agreed to withdraw all litigation. "The differences were misunderstandings that have now been resolved," Mazur said. "I think it got out of hand."
When it was announced, CHE was touted as the first major integration initiative linking Connecticut hospitals and physicians in contractual relationships with payers. The network was to start in Fairfield County and later go statewide.
Also represented by CHE are 147-bed St. Joseph's Medical Center in Stamford and 400 physicians. According to court documents, it contracts with 12 major insurers and provides services to about 20,000 people in Fairfield County.
PHP, which claims to be a pioneer in developing healthcare delivery systems, operates similar networks in Georgia and New Jersey. It plans to use Connecticut as a platform for growth.
A year ago, it said it was negotiating to develop a delivery network in metropolitan New York and expected to market an integrated healthcare system covering the Northeast. Last week Mazur said those plans remain in place.