Two monopolistic healthcare systems in adjoining markets in western Virginia have come together to share ownership and management of a 160-bed hospital that lies between them.
Carilion Health System in Roanoke turned over 50% ownership of its Bedford Memorial Hospital to Centra Health in Lynchburg last week. The agreement calls for both systems to contribute $1.5 million to the Bedford hospital for capital and debt payments.
The partnership, effective immediately, is the first time the systems, headquartered about 50 miles apart, have collaborated on any project, said Centra Health spokeswoman Susan Brandt. Both systems describe their relationship to date as competitive.
Carilion is an 11-hospital system that includes 740-bed Carilion Medical Center, the only hospital in Roanoke. The system reported $940 million in revenue in fiscal 2000. Carilion declined to provide the amount of its 2000 profit or loss.
Carilion acquired Bedford Memorial in 1983. The hospital has had close to a break-even financial performance in recent years; last year it lost $1.5 million on $19 million in revenue, and 10 months into this year it is projecting a $1.2 million profit.
Centra Health is two-hospital system that includes the only hospitals in Lynchburg, 350-bed Lynchburg General Hospital and 323-bed Virginia Baptist Hospital. In fiscal 2000, the system earned $9.7 million on $240 million in revenue.
The decision by Carilion to let a regional competitor have a piece of its network came after the two market powers reached a stalemate in Bedford, a rural community of approximately 6,000 people. "For all that we did and all that Centra did, market shares didn't change that much," said Carilion President and Chief Executive Officer Edward Murphy, M.D.
Each system has gotten about half of the tertiary-care referrals out of Bedford in recent years. People from the eastern side of town tend to use Centra's Lynchburg hospitals, while those on the western side opt for Carilion's Roanoke facilities, Murphy said.
Carilion owned the hospital, but Centra had the dominant primary-care practice in the community. Both offered cardiac rehabilitation services in an effort to draw more heart patients.
"There is a feeling that maybe Bedford has the sense that they are in the middle of a tug of war at times," said Carilion spokesman Ed Hamilton.
Now the system's respective physician practices will be merged, as will their cardiac rehabilitation programs.
"The competition, if it continues to exist, will now be based on the right stuff," Murphy said. Specifically, Murphy said he expects that patients will now pick their regional hospital based on the quality of care and service provided there rather than on which primary-care physician they use.
Murphy said the partnership in Bedford might lead to other joint projects between Carilion and Centra Health. The two are discussing the possibility of a shared food production service. When asked about a possible merger between the two systems, Murphy said, "You would never say never, but I think that is clearly not the intent at this point."
Bedford Memorial Administrator Howard Ainsley will remain on the Carilion payroll, as will the rest of the hospital's 350 employees, but Ainsley now will report to a new 18-member board of directors with equal representation from Carilion, Centra Health and the Bedford community. Carilion and Centra Health will equally share Bedford's profits or losses from now on.
Ainsley said Carilion had filed notification of the joint ownership arrangement with the state attorney general's office, but said the systems were not required to get clearance from federal antitrust authorities because of the small size of the deal.