To for-profit Triad Hospitals, Las Cruces, N.M., is a business opportunity. To administrators at the only acute-care hospital in Las Cruces, Triad is a threat.
It is unclear at this early stage who has the most to win or lose from Dallas-based Triad's coming to town, but the tug of war in this growing part of New Mexico shows the lengths to which a for-profit hospital chain will go to establish itself in a potentially profitable market. It also serves as a blueprint for Triad's future expansion into other markets.
"With a 180,000 population and the high percentage of outmigration (people leaving the area for services), with strong physician interest, we felt it was an excellent opportunity to provide a service, to recruit physicians to the community," said John Hummer, whom Triad hired in August to become chief executive officer of its planned 125-bed hospital in Las Cruces.
Ground has yet to be broken on the facility, which won't be operational until early 2002.
That's why, without a hospital in place, Triad has already worked to win over local physicians by flying them to its newest acquired or built hospitals in Tulsa, Okla., and Alice, Texas. It has created a physician-led steering committee that makes decisions about the future hospital, which is expected to cost Triad at least $60 million. Triad has also worked to win over the community, announcing a contest Las Cruces residents can enter to help pick the name for the new hospital.
The deliberate penetration of the community is a strategy Triad is employing elsewhere. In Lubbock, Texas, for example, Triad already has a 30-acre property under contract and is assessing whether to build a hospital there. The company has been holding meetings with Lubbock physicians for months as it works to sort out the demographic information it needs to make a final decision.
With the recent announcement that Triad has agreed to buy Brentwood, Tenn.-based Quorum Health Group, the company has cut back on some of its pending individual projects, but it is still on the lookout for profitable markets, analysts have said.
"Certainly they're trying to find markets that have above-average growth rates," said Frank Morgan, a healthcare analyst in the Nashville office of Jefferies & Co., an investment bank. "If you look at the acquisitions they've announced, those have been above-average growth-rate markets."
Las Cruces is for now a one-hospital town. The lone facility, 228-bed Memorial Medical Center, is 50 years old. It was jointly owned by the city and county until 1998, when the two parties agreed to lease it to a private, not-for-profit corporation.
Triad, like several other for-profit hospital chains before it, has had its eye on Las Cruces for a while, thanks to the city's high levels of outmigration and a growing retiree population. For-profit hospital chains often welcome markets where the population goes elsewhere for care because the chains have a chance to lure patients back by offering new services and by recruiting more physicians.
But Memorial sees Triad as an unfriendly competitor that threatens both its base of insured patients and the federal funding it receives for being the only provider in town, administrators said.
The county's population grew 25% during the 1990s and is expected to grow another 21% by 2010, according to figures provided by Dona Ana County. More than 30% of these residents are uninsured, one of the highest levels in the nation.
"Our perspective is that another hospital coming to town will cause us to lose our sole-community-provider status," said MaryAnn Aelmans-Digman, Memorial's president and CEO. "If they don't agree to take care of everyone who comes through the door, then we believe we will be in a disadvantaged position."
A sole community provider is a hospital that is the only Medicare and Medicaid provider in a service area; as such it receives higher federal and local reimbursements.
Hummer argued that competition will benefit the community and keep patients in town who would otherwise go elsewhere for care.
"Memorial already has competition," he said. "It's called El Paso (Texas). It's called Albuquerque."
Triad recently announced it has picked a site for its new hospital, on a 28-acre parcel of land that in 10 years is expected to be central Las Cruces.
The property is actually the second Triad has purchased. The first, for which Triad paid $2.8 million, was across the street from Memorial's HealthPlex facility, an ambulatory-care and diagnostic center that Memorial recently announced it would expand in a $22.7 million project.
The problem was that Triad's parcel had a restrictive covenant on it preventing anyone from building a healthcare facility there unless Memorial agreed. Triad at first thought it could sway Memorial, but Memorial stood firm, which forced Triad to buy a second piece of land. The company now plans to sell the first parcel.
Aelmans-Digman said Memorial's expansion plans are not in reaction to Triad's coming to town and adds that Memorial has had a plan in place for years, but that plan has been bogged down in a legal challenge.
However, the expansion project, which would add 24 private patient rooms at HealthPlex and 55 rooms at the main hospital, was announced on Oct. 12, just as Triad was sorting out where it would build its facility.
The legal challenge to Memorial's plans came in early 1999 from state Attorney General Patricia Madrid, who said the hospital wasn't complying with state wage requirements on its construction and expansion projects. In October, the state Supreme Court overruled a district court judge's opinion that state wage requirements applied to the hospital, sending the case back to state district court.
In 1999, the hospital reported a $1.3 million profit on revenue of $135 million, Aelmans-Digman said. But if Triad comes to town Memorial will lose at least $2.5 million in sole-community-provider funding, she said.
The community is waiting to see how it all shakes out.
Las Cruces Mayor Ruben Smith said he has heard arguments on both sides, and his main concern is that if Memorial begins to falter, it will be thrown back into the city and the county's laps.
"Very clearly, (Triad) is here to do business," he said. "They're here to provide the best services they can and they're here to compete. One thing without a doubt is the competition they'll bring to the community will force Memorial to improve services they're offering, and probably have them reassess the services they will be able to offer."
County Commission Chairman Carlos Garza is caught in the middle. His wife is a Memorial employee, and his sister is on a community board for Triad.
"I personally am fairly optimistic that they'll either coexist or one of them won't make it," he said. "That's unfortunate, but that's the way things are today."