A university hospital in Utah that tried to dump a money-losing clinic ended up publicly apologizing to clinic doctors, returning clinic ownership to the doctors and paying them close to $800,000.
As hospitals and hospital systems across the country trim money-losing physician practices to reduce operating costs, the lesson from Utah is to do it delicately.
The doctors' victory came after a nasty, six-month legal battle with the state's only university-owned healthcare system over control of the Park City Family Health and Emergency Center, a small clinic in the ski resort of Park City.
The financial settlement topped $755,000, but the eight doctors felt the public apology from the University of Utah was more important than the money. The university just months earlier had orchestrated what the physicians described as a "smear" campaign to try to discredit clinic doctors.
The final settlement, in early September, called for the university to mail a letter of apology to every household in Summit County, praising the physicians at the clinic. That statement was repeated in a full-page ad in the local Park Record newspaper and through e-mailings to scores of university employees.
"It's like a fairy tale," said Robert Winn, M.D., a clinic physician who helped lead the fight. "I would never have guessed we'd be back in our building--and get a financial settlement.
"More important, however, is what we call the `truth statement.' It's really a remarkable settlement," Winn said. "We needed our reputation and our integrity back. We wanted to set the record straight, and we did. The truth statement was the last thing to be negotiated. And we wouldn't settle without it."
"Hospitals have tried things, and the bottom line hasn't gotten any better," said Gregory Mertz, president of the Horizon Group, a consulting firm that works with hospital-owned medical practices. "They've tied compensation to performance; they've tied compensation to the bottom line. But nothing has worked out, so the CEOs said, `Well, we're smart guys and we can't fix it--so let's dump 'em.' "
There's no way to gauge the settlement's impact on the world of hospital-owned medical practices, but Winn said the experience left him concerned about the "values" of such relationships.
Since the alliance about five years ago, Winn lamented, "medicine has changed."
The university appeared to be struggling with the same problem faced by countless hospitals that purchased physician practices during an ill-fated buying binge in the mid-1990s, observers said. At the time, there were no provisions for incentives tied to productivity--an omission that caused financial woes for many hospitals.
"You're seeing a classic case here of what you're seeing being played out all over the country," said university spokesman Fred Esplin.
Gerry Niederman, a healthcare lawyer with Faegre and Benson in Denver, said, "This is a trend that is not going to go away."
Mertz said the Park City case is symptomatic of the stampede toward divestiture during the past 18 to 24 months. During that period he estimated as many as 25% of hospitals with physician practices have "unwound" those money-losing alliances.
Although average losses have fallen below $80,000 per doctor in recent years, Mertz said, a national report using 1999 data indicated that losses per practice now exceed $100,000 a physician.
Many hospitals, like the university's, are willing to unload the practices at a loss. But the so-called "truth statement" clearly distinguished the Park City wrangle.
A distinct about-face for the university, the statement was triggered by a local judge who deplored what he called the university's "Draconian" effort to discredit the doctors and assume control of the clinic.
During its public-relations blitz, the university suggested in a glossy, two-page mass mailing that the physicians opted to "sell" their commitment to their patients for "personal gain." The flier also blamed last year's $1.2 million clinic operating loss on the staff's "low productivity."
University officials said the settlement, which transferred ownership of the clinic back to the doctors who sold it to the school five years ago, was a drastic step designed to staunch a steady stream of red ink.
They said the 9,000-square-foot facility, which treated about 40,000 patients last year, lost almost $1 million annually. It was part of the University of Utah Health Network, the managed-care affiliate of University Hospital that operates 10 clinics with some 90 doctors along the Wasatch Range. The flagship for the system is 361-bed University of Utah Hospitals and Clinics in Salt Lake.
"We're glad it's over," Esplin said. "It was expensive, but it wasn't nearly as expensive as continuing to operate with the losses."
He also said a public-relations effort that the clinic's doctors dubbed a smear campaign was an attempt by the university to combat the local newspaper and radio station's "sympathetic" coverage of the case.
"During the heat of the dispute," Esplin said, "it was difficult for the university to share its side of the story. We placed an ad and sent out fliers. The physicians took it as an attack on them personally. That wasn't the intent."
The legal battle began when the university tried to dismiss the doctors after they complained about cuts in staffing and hours at the clinic; Esplin said the university had simply wanted to amend the terms of the doctors' contract and downsize the clinical staff to reduce the financial hemorrhaging.
Winn and his associates sued the university, disputing both their dismissals and a controversial noncompete clause that could have prevented them from practicing for two years in Summit County and Park City, an international resort about 35 miles east of Salt Lake City.
In the end, the university, which purchased the clinic in 1995 for $1.2 million, agreed to pay the physicians about $755,000 in incentives, severance, sick pay and back rent on the clinic buildings. The school, which lost another
$1 million when it sold the clinic back to the doctors, also took considerable heat in the local media for spending almost $235,000 on its public-relations campaign and lawyers' fees.
As part of its court-ordered statement, the university retracted its claim that the physicians sold their right to practice medicine for personal gain and withdrew allegations that the doctors caused the clinic's financial difficulties. There were also these words: "The university recognizes that the Park City doctors . . . have worked diligently for many years to service the needs of their patients."
For his part, Winn said he has kept an exhaustive diary of the ordeal, a personal chronicling of his search for "truth."
His struggle was aided by local residents who rallied to the clinic, sending letters to the university complaining about its tactics. As many as 1,000 locals vowed to pull their files and never return to the clinic if the physicians were ousted.
"It's an amazing story," Winn said. "People tell me it's going to be a movie or a novel someday."