Loyal physicians, strong demand and the financial backing of both a national chain and a dominant local provider weren't enough to sustain a women's hospital in Austin, Texas, that will close next month after less than four years of operation.
Universal Health Services says, effective Feb. 28 it will shutter 24-bed Renaissance Women's Center of Austin, which has failed to turn a profit. The King of Prussia, Pa.-based company also said it had abandoned its plan to create a chain of specialty women's hospitals.
The hospital closure had been blocked for nearly a year by a lawsuit filed by a group of OB/GYNs, which claimed Universal was breaching its 15-year lease agreement by closing the hospital before the lease expired.
A Travis County, Texas, judge lifted an order blocking closure after a jury awarded the physicians $6.9 million in damages in November. UHS, which disputes the physicians' claim, said it would appeal the damages award.
Charles Boyle, UHS' assistant vice president of corporate accounts, said the company expected the facility to be profitable because Austin is a growing market with a young population. In fact, volume exceeded expectations, with about 2,000 births annually, company officials said. However, managed-care rates for births didn't cover costs, and profits from surgical procedures weren't enough to put the facility in the black, Boyle said.
He said the hospital had been losing more than $2 million a year on revenue of about $7 million. It cost about $14 million to build the facility, according to local media reports.
When it opened, the Renaissance Women's Center was the third in what UHS had anticipated would be a chain of small hospitals specializing in women's healthcare. Its strategy was to take OB/GYN services out of general medical/surgical hospitals and combine physicians' offices and inpatient services in a single building for convenience and better care (March 11, 1996, p. 22).
But after developing just two women's centers, in addition to one it had acquired, UHS put the idea on hold. Last year, it sold its interest in Lakeside Women's Hospital in Oklahoma City to MediSphere Health Partners, a company that specializes in women's centers (March 20, 2000, p. 27). Its other facility, in Edmond, Okla., has been profitable, company officials said.
Margaret Thompson, M.D., president and founder of the 10-physician Renaissance Women's Group, which is in the hospital building in Austin, said the doctors were stunned by the company's decision to close the hospital. The facility opened in September 1997 with a "cord cutting" attended by such high-profile Texans as Lady Bird Johnson, a former first lady, and Susan Dell, wife of the computing magnate.
"We felt we had a contract with Universal that guaranteed us that their commitment to this concept would keep the hospital open," Thompson said. "We also believed in the concept, and the community thought the hospital was a huge success."
She said UHS assured the physicians that the hospital would be profitable. She added, "Since they were a large, successful hospital corporation, we felt confident that they knew what they were doing."
Austin-based Seton Healthcare Network, which operates four acute-care hospitals, held a minority stake in the venture until December 1999. Seton's involvement "reassured us that they (Seton) looked at the financial picture and felt confident that it would be successful," Thompson said.
Seton, a member of Ascension Health, was supposed to use its muscle in the market to help the hospital win favorable managed-care contracts, Thompson said, but did not follow through on that promise.
Gayle Granberry, Seton's director of marketing, said the system would have no comment.
Boyle said UHS re-evaluated whether investing in specialty women's hospitals "really justified the investment." UHS has no plans to open more women's hospitals, he said. He declined to say how much UHS invested in the facilities.
Renaissance Women's Group will move its offices to a building adjacent to North Austin Medical Center, Austin, which is owned by HCA-The Healthcare Co.
But the physicians said they would continue to fight what they viewed as discriminatory rates for women's services in the Austin market. Last April, Thompson announced the creation of the Equal Health Care Alliance of Austin to promote equitable reimbursement. She told Modern Healthcare that the group would try to get a bill banning gender discrimination in health plan reimbursement rates introduced in the state Legislature. She said the organization also planned to file a class-action lawsuit on behalf of the state's OB/GYNs against the state Medicaid system for gender discrimination in its rates.
Kim Ross, chief lobbyist for the Texas Medical Association, said the society hadn't decided whether to back the alliance's efforts. Ross noted that the high-profile support of the alliance "keeps (the issue) from being hidden from view."