Sharing did not come easily to the parents of a two-hospital joint venture in rural West Virginia. And the combination of philosophical clashes and red ink was enough to derail a 21/2-year-old alliance that was originally crafted to cut costs.
Camcare, the not-for-profit parent of 784-bed Charleston Area Medical Center, last week submitted a certificate-of-need application that asked the state of West Virginia for permission to unwind Heritage Health System, a joint venture formed in 1996 with Lexington, Ky.-based Appalachian Regional Healthcare, a 10-hospital not-for-profit system.
Like other hospital alliances around the country that are discovering that what may look appealing on paper can be less so in reality, these two systems found that collaboration was not synonymous with lower costs or greater profits.
"We're almost pretending it never happened," said Stephen Hanson, the recently named president of ARH.
The joint venture was formed in August 1996 with three board members from Camcare and three from ARH. Within two years, each system had contributed a hospital in hopes of creating an independent system that would contract jointly with managed-care companies and refer patients to CAMC for tertiary care. The system also included physician practices, home care and medical clinics.
Camcare contributed 79-bed Plateau Medical Center, in Oak Hill, W.Va., and ARH contributed 173-bed Beckley Appalachian Regional Hospital. Both hospitals were leased to Heritage, and the intent was to let Heritage run the hospitals independently of their parent systems, said Camcare President Phillip Goodwin.
But not only did the hospitals begin to lose money, the system's owned physician practices, like other provider-managed practices around the country, turned out to be big drains on Heritage's bottom line.
In 1999 alone, the physician practices lost $1.5 million, said Albert Michaels, Heritage's president and chief executive officer.
He said the system probably lost between $5 million and $7 million since its 1996 creation. "We had a hard time letting go of our assets over there and really having it function as a true joint collaborative," Hanson said.
Both hospitals had been profitable before they entered the joint venture.
Unwinding the deal is expected to cost $20,000, according to the CON application filed with the West Virginia Health Care Authority. Each parent system will become responsible for its own hospital's losses, Goodwin said.