A St. Louis specialty hospital that was approved by the state but never built still managed to break new ground.
The state approved the project in part because an agreement between the hospital's owners and the state's largest business health coalition would have required the new hospital to meet specific quality-of-care goals or face financial penalties.
Although the project was scrapped in August for unrelated reasons, other hospital operators in Missouri--and perhaps nationally--may face the same quality-or-pay expectation in the future for their proposed expansion projects.
James Stutz, executive director of the St. Louis Area Business Health Coalition, said the set of criteria developed by his coalition and providers for the project will serve as a precedent.
"As other projects come up we are certainly going to go back to our set of standards," he said.
Gregg Lehman, president and chief executive officer of the National Business Coalition on Health, called the St. Louis coalition's achievement of aligning provider incentives with outcomes unique and the beginning of a trend.
"I think in the next 12 months we'll see a lot of that coming into practice," Lehman said.
The project that got the ball rolling was a proposed 55-bed women's hospital to be built in Chesterfield, Mo., an affluent western St. Louis suburb. Building the hospital for $33.6 million were SSM Health Care, a St. Louis based Roman Catholic health system, and Women's Health Physicians, a 70-member independent practice association.
SSM and Women's Health would have owned the new for-profit hospital, sharing ownership and governance through a joint venture. SSM said it sought to build the new facility to provide comprehensive, coordinated women's healthcare services in a fast-growing market.
Two of SSM's hospital system competitors, Unity Health System and BJC Health System, opposed or publicly questioned the project, which was submitted to the Missouri Health Facilities Review Committee for certificate-of-need approval in August 1999. Both Unity and BJC have hospitals providing women's services in the Chesterfield market.
Unity said "it was an unnecessary duplication of services available in abundance within a few miles from the proposed site." The Missouri CON program staff found that the project did not meet the provisions for community need.
Despite those objections, the Missouri Health Facilities Review Committee approved SSM's CON application by a vote of 5-3 in December 1999.
In approving the project, the committee may have been swayed by the agreement--reached just two days before the vote--between the hospital operators and the business coalition.
"I think that certainly it had an impact," said Tom Piper, director of Missouri's CON program.
In exchange for the coalition's promise not to oppose the project, the hospital operators agreed to meet several criteria, including clinical performance goals that were to be completed at a later date. SSM had suggested areas such as Caesarean-section rates and breast cancer screening rates.
And, if the new hospital failed to meet those stated objectives, it would have to defer profits for up to five years. Distributions from the facility due SSM and the physician group each year would be held in escrow if they didn't achieve targets for quality and accountability.
"We felt this was enough . . . so there would be a real incentive to meet the targets," Stutz said.
In a worst-case scenario, for example, if the providers missed the goals in each of the first five years of the facility's operation, they would not receive their accumulated profits until the end of the fifth year.
SSM said that it had secured financing for the new hospital from a "number of sources" and was working out details. Despite that effort, in early August SSM and Women's Health Physicians pulled the plug on the project, citing the challenges of the system-physician partnership and rising interest rates.
"These were private physicians putting their own income stream at risk in order to do this," said Gita Budd, SSM's regional vice president of strategic planning. "I think that is exceptional."
Budd said meeting the coalition's quality-or-pay criteria did not have any effect on the decision to abandon the project.
Piper, however, said he suspects the agreement may, in fact, have had some bearing on the deal's breakdown.
"I think it was another straw, whether that was the straw we may never know," he said.
Doctors from Women's Health Physicians who were contacted for this article either did not return telephone calls or said they did not wish to comment publicly on the failed project.