The executives of the three not-for-profit hospitals in Green Bay, Wis., say the opening of a $102 million for-profit hospital there may drive up local healthcare costs and negatively affect their hospitals' balance sheets.
"Our position has always been the hospital is not needed," said Joseph Neidenbach, administrator of 353-bed St. Vincent Hospital.
"The new hospital has nothing to do with community needs," said James Coller, administrator of 119-bed St. Mary's Hospital Medical Center.
The hospital in question is the Aurora BayCare Medical Center, a 110-bed hospital scheduled to open in September 2001. Construction of the facility began in February.
The hospital is a 60-40 joint venture between 14-hospital, not-for-profit Aurora Health Care, Milwaukee, and BayCare Health Systems, a multispecialty clinic of 75 physicians in Green Bay, respectively.
Combined, Aurora and BayCare are putting up 30% of the $102 million needed to build and equip the new hospital, while the remaining 70% is coming from a consortium of five lenders, including a life insurance company, banks and the state of Wisconsin's investment board, a money manager that manages the state employees' pension funds, BayCare officials said.
Jeffrey Mason, BayCare's chief executive officer, said he expects the new hospital's effect on the Green Bay market will be the opposite of what other hospital CEOs predict.
"We're bringing more competition to the market so the pricing will get better and the service will increase," Mason said. "It becomes quite a benefit to the market."
In addition to St. Vincent and St. Mary's, Green Bay has a third hospital--180-bed Bellin Hospital.
Both St. Vincent and St. Mary's are part of the Hospital Sisters Health System, Springfield, Ill. Each hospital operates with an occupancy rate of less than 50%.
Bellin's occupancy rate is about 55%, said George Kerwin, Bellin's president.
Wisconsin doesn't have
a certificate-of-need program, so no special permission was required to build the new hospital. There is a cap on the total number of inpatient beds allowed in Wisconsin. But the number of hospital beds in the state is more than 2,000 beds below the 22,500 bed cap, a state official said.
All three of Green Bay's existing hospitals are profitable.
St. Mary's earned profits of almost $1.9 million on total revenue of
$50.6 million in the fiscal year ended June 30, according to data provided by the Wisconsin Bureau of Health Information. During the same period, St. Vincent had net income of $17.2 million on total revenue of $148.2 million.
Bellin earned a profit of $12.1 million on total revenue of $189 million for the fiscal year ended Sept. 30, Kerwin said.
Kerwin acknowledged concern about the new hospital cutting into that profitability but wouldn't comment further.
When the new hospital opens, it will be only the second for-profit hospital in the state of Wisconsin. Now, 49-bed Indianhead Medical Center, Shell Lake, is the only for-profit hospital among the state's 122 acute-care hospitals, according to the Wisconsin Health and Hospital Association. Northeast Health Management, a Stevensville, Md.-based chain that owns three other hospitals in Texas and West Virginia, owns Indianhead.
For the Green Bay metropolitan area, which has a population of about 220,000 people, the new hospital is an important economic tool, said Duanne Swift, president of the Green Bay Area Chamber of Commerce.
Swift said it's significant because the hospital will be the single largest tax-paying organization in the city.
"Our view on it is that it's an important economic development project . . . it is going to contribute," Swift said.
But he did acknowledge "there are certainly those who believe that we don't need a new hospital."
But Green Bay is growing. According to the chamber of commerce, Green Bay's rate of population and new job growth in the last decade has been among the state's highest.
Talks between Aurora and BayCare about building a new hospital date back two years, after Bellin Health Systems, which operates Bellin Hospital, sued Aurora (Dec. 7, 1998, p. 28). Bellin entered an agreement with Aurora and wanted out of the deal to pursue other partnerships. It filed a lawsuit in 1997 saying its deal with Aurora violated federal antitrust laws and restrained trade. The lawsuit was settled in January 1999, although settlement terms were not disclosed.
Aurora wants a hospital in Green Bay because it employs 53 physicians in the Green Bay area, including 31 in the city.
Coller of St. Mary's said Aurora was motivated to build a hospital so the system's employed physicians could steer patients there.
Aurora spokeswoman Diane De La Santos disagreed, saying Aurora needed a local acute-care hospital partner to complete its continuum of care. Operating a hospital in Green Bay has been part of Aurora's overall strategy.
"They don't understand the vision that we have to integrate care and really improve the quality of care that's being delivered today," De La Santos said.