SIOUX FALLS, S.D.--For hospital administrators in competitive markets, the intense pressure to get results can make it easy for them to forget how much they have in common with their foes.
That may be the case in Sioux Falls, S.D., and the South Dakota Association of Healthcare Organizations is bearing the brunt of the memory loss.
The public spat between Sioux Falls' two acute-care hospitals and the association stems from a new entrant there: the $50 million, for-profit Heart Hospital of South Dakota, set to open in March.
The Heart Hospital is part-owned by one of the established hospitals, not-for-profit Avera McKennan Hospital and University Health Center, the flagship of the Catholic-affiliated Avera Health system. The other major player in town, not-for-profit Sioux Valley Hospitals and Health System, objected to the Heart Hospital joining the association.
Kelby Krabbenhoft, president and chief executive officer of Sioux Valley, had said his system may need to leave the association--taking with it 30% of the association's revenue--if the Heart Hospital were allowed to join because the association would have a difficult time representing both for-profit and not-for-profit providers.
Though Krabbenhoft has backed off his threat, he still argues that adding a large for-profit provider to the association blunts its lobbying efforts for higher government reimbursements.
"We have to be able to show that this (money) goes back to the community, rather than in the back pockets of investors," Krabbenhoft said.
The association agreed to review its policies, especially in regard to financial and patient disclosures, in return for Sioux Valley agreeing to remain a member, said Dave Hewett, the association's president. No association policies or by-laws would keep the Heart Hospital from joining the association, Hewett added.
The owners of the Heart Hospital, however, said Krabbenhoft's gripe has nothing to do with accountability or lobbying, and everything to do with competition with his system's flagship, 537-bed Sioux Valley Hospital-University of South Dakota Medical Center.
"This is a huge economic threat to Sioux Valley," said Fred Slunecka, regional president of Avera McKennan, one of the three owners of the Heart Hospital. "They were far more dependent on cardiovascular revenue than Avera McKennan."
The other two owners of the 50-bed Heart Hospital are for-profits: MedCath, a Charlotte, N.C.-based company that manages eight other hospitals specializing in open-heart surgery and cardiovascular care; and North Central Heart Institute, a physician group of five open-heart surgeons and 17 cardiologists.
David Crane, MedCath's president and CEO, said MedCath's eight other hospitals have weathered the same sort of "media smear campaigns" launched by competing hospitals. Attempting to block his hospital's membership in a state association is a new tactic, he added.
Despite the for-profit parentage, Slunecka says the Heart Hospital will be run in many respects like a Catholic not-for-profit, at Avera McKennan's insistence. The new hospital will honor the same charity-care policies as Avera McKennan, follow Catholic religious and ethical directives and donate a set percentage of revenue to local charities.
Upon hearing this claim repeated by MODERN HEALTHCARE, Krabbenhoft and other Sioux Valley executives on a conference call burst out laughing. "I just simply don't believe it," Krabbenhoft said. "If that was the case, then why aren't they not-for-profit? You can access capital better. There are a lot of benefits."
The shrill tone between the two hospitals may be best explained by their history of competition. Since Avera McKennan opened in 1911, the two providers have gone head-to-head, with no changes in ownership for either side.
"It has not historically been cutthroat competition, but it has been spirited," Slunecka said. "Think about the difference between a boxing match and a football game. There are a lot of matchups in a football game, but it's pretty hard to keep your eyes on all of them. In a boxing match, it's clear who the competitors are and what's going on."
And hospital associations across the country are struggling with a lot of conflicts between their members, such as not-for-profit vs. for-profit or specialty providers vs. acute-care providers, said Richard Wade, the American Hospital Association's senior vice president for communications.
"The things that divide them are a lot more obvious and in the forefront than the things that unite them," because of a tight payer environment from both government and private insurers and the heightening of competition, Wade said. One notable exception has been the lobbying effort for relief from the Balanced Budget Act of 1997 "because almost everybody has been hurt by it in some way," Wade said.