The fight over who controls healthcare can get pretty nasty.
Physicians who want to break out on their own to open specialty hospitals or outpatient surgery centers find that local hospitals will fight back, hard. Some hospitals are calling for state review while others are revoking or limiting medical staff privileges of the break-out physicians.
And hospitals trying to protect their competitive edge and the business decisionmaking powers of their boards are coming under fire from doctors who assert their methods are unfair and illegal.
Meanwhile, state certificate-of-need boards and supreme courts from Alaska to New Hampshire are getting a workout as both doctors and hospitals turn to litigation and regulation to fight their battles.
War and peace. The Orthopedic Professional Association, a group of eight orthopedic surgeons in Gilford, N.H., constructed the Central New Hampshire Ambulatory Surgery Center a year ago. But it has stood idle because of a bitter feud with a nearby hospital over CON review.
In June 1998, the orthopedic association received a waiver from CON approval for its center from the state Health Services Planning and Review Board. Lakes Region General Hospital, a 117-bed private, not-for-profit facility in neighboring Laconia, N.H., challenged the waiver, and it was temporarily rescinded at the end of July 1998.
After a series of partial reviews, more waivers and continued hospital challenges, the full review board finally ruled last fall that the surgery center was indeed subject to the full CON process. The orthopedists had already signed contracts and broken ground on their center, continuing to believe that, because the cost for the outpatient facility was less than the $1.07 million CON review threshold, they would ultimately be eligible for exemption from review.
They appealed to the state Supreme Court in May 1999 to reverse the review board's ruling. The New Hampshire Medical Society filed a friend-of-the-court brief on the orthopedists' behalf, intended to support all 4,000 New Hampshire physicians' rights to develop businesses outside of hospitals.
"We support a fair CON process, but it has not treated physicians fairly," said Palmer Jones, executive vice president of the state medical society.
While the orthopedic group was waiting for the court's decision, it announced that it was considering selling the center, with the hope that a new owner might win approval sooner.
Michael Cimon, administrator of the Orthopedic Professional Association, said the situation had exploded into "an all-out war in the community."
"(CON review) has never happened before in New Hampshire for an ambulatory surgery center," he said. "They didn't even have the rules for it."
Cimon said the doctors believed they could offer basic outpatient procedures for less than the hospital did but that both would be able to survive. In fact, he said, the orthopedists would continue to do 40% to 50% of their work at Lakes Region.
But he also said the medical group's problems had stemmed from Lakes Region because of the facility's dominant control of healthcare in a one-hospital town.
"Our contention is that the CON law in New Hampshire is really being used to protect hospitals from competition," Cimon said.
Henry Lipman, executive vice president and chief financial officer of Lakes Region, said there should be public comment on a surgery center that could impair the quality of healthcare in the area.
"We think that potentially, a facility without any constraints could have a significant adverse impact on the community healthcare system," he said.
Rules governing New Hampshire CON review for ambulatory surgery centers were approved May 15, Lipman said, and applicants for review will be approved if they can demonstrate that they won't have a major negative impact on a region's delivery of care.
The two sides came to the negotiating table in early June and announced a peace settlement on June 28. The orthopedic group agreed to sell the surgery center to the hospital for $1 million, with joint management and operating agreements.
Lakes Region spokesman Christopher Boothby said the deal was based on a recognition by both sides "that we could do a better job meeting the orthopedic needs of the community by working together."
The Orthopedic Professional Association has agreed to convert its building to condominiums, pending approval from Gilford's planning board. The association will sell the part of the building that houses the surgery center and the infrastructure for a magnetic resonance imaging facility to LRGHealthcare, the hospital's parent company.
All court actions by both parties will be withdrawn immediately, said John Vorel, a spokesman for the orthopedists and LRGHealthcare, and Lakes Region will submit a new application for CON approval. Vorel said now that the building is completed, Lakes Region can demonstrate that the costs are below the CON threshold.
"Both sides are very excited and encouraged," Cimon said of the agreement. "It's a dramatic turnaround, and I wish it had happened sooner, but I am glad it happened. We both had to give in a little bit, but the benefit is that we can be partners and grow from that partnership."
According to Lipman, Lakes Region had about $62.4 million in net revenue in 1999, losing $3.5 million on operations. The hospital posted a profit, he said, but that was with help from stock market investments.
"We don't want to rely on this to meet community health needs," Lipman said, adding that he expects to lose $3 million to $5 million in 2000.
What played out in Gilford and Laconia is playing out all over the country, Lipman said.
"The cumulative effect of the Balanced Budget Act (of 1997), HCFA changes, Y2K and managed care make one large orthopedic group's potential project more significant," he said.
Fighting for staff privileges. In a case awaiting decision by the South Dakota Supreme Court, the six doctors of Orthopedic Surgery Specialists in Aberdeen, S.D., have been duking it out with 224-bed not-for-profit Avera St. Luke's over staff privileges and hospital board authority.
To protect itself from the competition of a specialty hospital called Dakota Plains Surgical Center, which was opened by Orthopedic Surgery Specialists in April 1998, the board of St. Luke's voted unanimously in June 1997 to refuse staff privileges to any new orthopedic surgeons, except for two that the hospital was recruiting.
The doctors at Orthopedic Surgery Specialists sued St. Luke's in September 1998 when the hospital made good on its decision, refusing to grant staff privileges to John Mahan, a new orthopedic surgeon who was recruited by the group. Though Mahan would have worked with the orthopedists' group, Orthopedic Surgery Specialists argued that staff privileges at St. Luke's would be necessary for him to build a complete practice.
The plaintiffs alleged that the hospital violated antitrust laws (a claim which has since been dropped) and its own medical bylaws. The orthopedists also argued that the hospital endangered the public interest by limiting patient choice and physicians' ability to practice in Aberdeen.
"This lawsuit was prompted by Avera St. Luke's manipulation of access to hospital privileges to control referral patterns and keep its profitable operating room busy regardless of patient choice and quality or cost of care," the plaintiffs' lawyers said in the suit.
The lawsuit further argued that the hospital was punishing Orthopedic Surgery Specialists for building a day surgery center.
"(St. Luke's decision) made it impossible for Orthopedic Surgery Specialists to grow," said Richard Bramen, the orthopedists' lead counsel from the law firm Gray, Plant, Mooty, Mooty & Bennett in Minneapolis. He said an orthopedist without staff privileges in a one-hospital town could not make a living.
In a June 1999 circuit court ruling, a judge said St. Luke's bylaws do not permit economic credentialing, which occurs when a hospital bases staff privileges on financial considerations as well as professional qualifications. The court issued a permanent injunction to the hospital effective July 7, 1999, ordering it to process Mahan's application and those of other orthopedic surgeons in good faith.
Bramen said St. Luke's, the only general hospital within 90 miles of Aberdeen, failed to act on Mahan's application after 35 days. Mahan has since left Aberdeen.
St. Luke's attorney, Edwin Evans of the Sioux Falls, S.D., law firm of Davenport, Evans, Hurwitz & Smith, said that the medical staff bylaws do not prohibit the hospital from taking the action it did.
"The board closed the orthopedic segment of the medical staff based on business decisions it is entitled to make," Evans said. He said Orthopedic Surgery Specialists moved 75% of its practice to the specialty hospital, and St. Luke's volume dropped drastically as a result. If the state Supreme Court rules in favor of the orthopedic group, Evans said, St. Luke's will lose a profitable segment of business that helps support the unprofitable areas.
"Based on that loss, the overall services available to the community will suffer," he said. "It would result in medical staffs at hospitals having significant control, to the exclusion of the hospital's board of trustees, which is charged by its corporate bylaws and state laws in making business decisions to use the available resources to provide healthcare to the community."
The American Medical Association and the American Hospital Association and their respective state affiliates filed arguments in the case. Not surprisingly, they have opposing positions on the national debate about hospitals' rights to limit a physician's ability to practice and how facilities exercise that power.
"Medical staff bylaws forbid economic credentialing and create a bonding contract between a hospital and staff," said Donald Palmisano, a New Orleans surgeon and an AMA trustee. "The bylaws' provisions apply to applicants as well as current physicians. The goal is to get quality control and make sure we do what's in the patient's best interest."
In its brief, the AHA countered: "In its opinion, the court failed to consider that it has stripped the hospital board of trustees, that is ultimately responsible for governing the hospital, of its ability to make the independent, final decisions that are necessary in meeting the mission of the hospital."
Left out in Alaska. In yet another physician-hospital clash, an anesthesiologist in Fairbanks, Alaska, will have a second chance to argue that his hospital staff privileges were wrongfully revoked after he announced plans to build an outpatient surgery center.
The Alaska Supreme Court ruled in March that two Superior Court justices should not have dismissed two lawsuits filed by David Odom, M.D., against 198-bed Fairbanks Memorial Hospital and a local group of anesthesiologists.
One of Odom's suits claimed that not-for-profit Fairbanks Memorial, the only nonmilitary primary-care facility within 400 miles, violated Alaska's antitrust act by restraining trade, engaging in a group boycott and operating a monopoly. That suit was dismissed in Superior Court four years ago. The other suit alleged a breach of contract that cost Odom $500,000.
The doctor claims that two monopolies played a part in his dismissal--the operating room services controlled by the hospital and the anesthesiology services controlled by the anesthesiologists at Fairbanks Memorial.
"If you're not a member of the group at the hospital, you don't get to practice anesthesiology in Fairbanks," Odom said.
"There had been no allegations against Odom of misconduct or poor quality of care," said Odom's attorney, Ray Brown of Dillon & Findley in Anchorage, Alaska. Brown said allegations arose within days of Odom's giving notice in December 1992 of his plans to open his own surgery center. Odom's privileges were subsequently suspended without a hearing.
He was reinstated into the anesthesiology rotation on a limited basis in December 1993. But in June 1994 Odom again lost all staff privileges.
"The summary suspension that occurred was a result of Odom's refusal to work with a (certified nurse anesthetist) on duty, causing a number of procedures to be delayed or canceled," said Fairbanks Memorial attorney Howard Lazar of the Anchorage firm Delaney, Wiles.
In an attempt to reapply for privileges, Odom exhausted the hospital appeals process with no success. He said he has lost his house, vehicles and life insurance as a result of the hospital's action. Odom now treats patients for weight loss and natural hormone replacement therapy.
"Suspending or limiting a doctor's privileges, especially an anesthesiologist's, is basically a death sentence," Brown said. "(The hospital's) basis for suspending his privileges was totally a ruse to protect its territory. It illustrates how brutal monetary issues in medicine have become."
Lazar said Odom's qualifications as an anesthesiologist had been under investigation for some time and that deficiencies were found in how he was treating some of his patients.
"The outpatient surgery center question had absolutely nothing to do with Odom's suspension," Lazar said.
The Supreme Court has said Odom's antitrust case can move forward and should be decided by a jury.