Quorum Health Group broke ground Jan. 7 on a new $112.4 million health complex in Vicksburg, Miss., that it hopes will cure an ailing joint venture with Columbia/HCA Healthcare Corp.
Before ringing in the New Year, the state of Mississippi gave the green light for the project, which includes a 170-bed hospital that Quorum is building to replace one of the joint venture's two aging facilities. State health officials say it is the largest healthcare construction proposal ever approved in Mississippi.
"It's historically the largest project we've ever had come before the department of health for a certificate of need," said Harold Armstrong, chief of the division of health planning and resource development for the Mississippi State Department of Health.
Brentwood, Tenn.-based Quorum and Nashville-based Columbia formed the joint venture, called River Region Health System, in November 1998. It includes 197-bed Parkview Regional Medical Center and 154-bed Vicksburg Medical Center. Columbia had owned Vicksburg Medical and Quorum had owned Parkview. The new building will replace 40-year-old Parkview. Vicksburg Medical will be converted to a specialty facility for psychiatric and alcohol dependency services and will also house a 31-bed skilled-nursing facility, Armstrong said.
The joint venture is one of two shared by Columbia and Quorum, two of the nation's largest for-profit hospital chains. The other is in Macon, Ga., where each contributed two hospitals. There, Columbia operates the partnership and owns a majority interest in Macon Healthcare.
In Vicksburg, Quorum owns 65% of the venture and manages the facilities.
Until the merger, the two hospitals, the only acute-care facilities in Vicksburg, had been rivals, embroiled in a federal antitrust lawsuit that stemmed from a proposed merger between a local physician group and Parkview. Columbia filed suit against Quorum and the Vicksburg Clinic physician group in July 1996 in U.S. District Court in Jackson, Miss.
The judge dismissed Columbia's complaint. The company argued Quorum's purchase of the clinic violated federal antitrust laws by giving the hospital a monopoly of physician services. Ultimately, the two corporate foes found it preferable to craft an alliance than to compete (Jan. 4, 1999, p. 2).
But Quorum's problems did not end there. Thanks in part to difficulties with physician contracts, the merged system has been an operational trouble spot for the company, Quorum's President and Chief Executive Officer James Dalton said when the company released its first-quarter earnings in October 1999.
Quorum, in fact, had to establish a bad-debt reserve because of the declining value of the merged physician clinics in Vicksburg, he said at the time.
Dalton said cost savings from the merger won't be significant until the new facility is built.
Quorum spokeswoman Shea Davis said the new hospital will be a catalyst for improvements in relationships among the integrated system's various parts.
There are 68 physicians employed by the hospital system. As for the historic animosity between the physician groups that came together, Davis said, "I think that's something they're working on."
Briggs Hopson, M.D., chief of staff at River Region and a practicing physician in Vicksburg for 33 years, said he and other physicians welcome the new facility.
"As far as physicians go, all I can say is everyone is happy," he said. "It will bring the community together and give us a new facility and the ability to bring new people to the area."
Few physicians in town are not employed by River Region. There is one independent group of four physicians, called Mission Primary Care Clinic, as well as several sole practitioners.
One of the independent practitioners, who asked not to be identified, said that consolidation of the physician groups has limited patients' and doctors' choice within the community.
"When the choice is taken away because the corporation is in charge, and the patient has only one place to go, then I personally don't feel it is fair for the patient," he said.
The few independent physicians left in town have little negotiating power with managed-care companies, he added.
Gertrude Young, a Vicksburg alderwoman, said the city did not initially support the joint venture.
"The merger was something that the community and citizens did not support at first, simply because they wanted to feel they had a choice as to what hospital they would go to," she said. "I always felt like it created a monopoly."
Earlier this year, the city of Vicksburg backed away from a $4.5 million tax increment financing loan for the project because Quorum had laid off more than 60 employees following the merger.
But now Young and others are looking forward to the new facility and the promise of more modern technology.
Quorum's Davis said about 50% of patients who live in Warren County, where Vicksburg is located, go elsewhere for medical care, especially for specialized services. The closest acute-care facilities are in Jackson, about 35 miles east of Vicksburg, and in Monroe, La., which is about 70 miles west.
But according to state figures, 84% of patients who live in Warren County use the Vicksburg facilities.
The CON application calls for a 316,000-square-foot facility to replace Parkview and the acute-care services at Vicksburg and a 44,000-square-foot physician office building. Construction is scheduled to begin in March and be completed in 2002. It would have cost $15 million to $20 million to bring Parkview up to today's codes and standards, according to the state health department's analysis of the project.