A public authority near Houston is considering jumping back into the hospital business less than a decade after selling its hospital to a for-profit company, citing a sudden shortage of inpatient beds. The move has provoked a dispute with the nation's largest hospital chain, HCA, over who should provide healthcare to the area's burgeoning population.
While some local governments are selling their hospitals to investor-owned chains that promise to run them more efficiently, officials at the Montgomery County (Texas) Hospital District contend that a public facility may be the only way to meet demand. They say that too many patients are waiting for care, and private hospitals are not picking up the slack.
The district's interim chief executive officer, David Layton, called the capacity issue a "a crisis situation." "Their beds never cool off," Layton said of the county's only tertiary facility, 220-bed Conroe (Texas) Regional Medical Center, which the district sold to HealthTrust in 1993. HealthTrust was acquired by HCA in 1995.
"We've got our ambulances stacked six and seven deep sometimes at the hospital, and there's nowhere to put the patients," he said.
Montgomery County is an extreme example of how quickly demand is increasing for inpatient services in some markets. Many regions are expanding services in response to waning managed care restrictions and aging baby boomers, after reducing capacity just a few years ago.
In 1995, HCA, formerly Columbia/HCA Healthcare Co., closed its Doctors Hospital in Conroe and consolidated services at Conroe Regional, leaving the city with one hospital. Last year, HCA was arguing in court that property taxes it paid for Conroe Regional in the late 1990s should be reduced in part because it had a surplus of beds (April 2, p. 16).
"The world has changed a lot in the last six years," Conroe Regional CEO Russell Meyers said, citing local population growth and increasing demand for services as a result of a decline in managed care.
A needs assessment commissioned by the hospital district projected a shortage of 215 beds by 2010, even with planned expansion. County officials expect the population to increase by about half, from 300,000 people to 440,000, by 2010.
"We'd rather the private sector (build more beds). But if they won't, a governmental entity such as us will have to step in and do it," Layton said.
HCA, which owns Conroe Regional and one other hospital in the county, doesn't like the idea of competition from a new public facility. HCA sent a letter to the district in November, saying it intends to enforce a clause in the 1993 agreement that prohibits the district from operating another hospital until 2008. Meyers acknowledged that sometimes "so many patients come at once that we don't have a place to put them." But he said the bed deficit will be alleviated by construction.
Conroe Regional plans to expand to about 300 beds by the fall of 2002. Meanwhile, Houston-based Memorial Hermann Healthcare System is expanding its 103-bed Memorial Hermann The Woodlands (Texas) Hospital to 240 beds, and St. Luke's Episcopal Hospital in Houston is building an 82-bed hospital in The Woodlands, in the same county.
Meyers called the needs assessment "a poorly crafted document" because it does not acknowledge that some patients seek care in Houston.
But Layton said Houston's hospitals are also hitting capacity limits.
This month, the hospital district filed a lawsuit in Harris County (Texas) court, seeking to have the noncompete clause declared invalid. Greg Hudson, the hospital district's general counsel, said the district should not be bound by the agreement because Texas law charges the district with providing for the county's healthcare needs. "They can't be frustrated by the contract in carrying out their governmental responsibility," he said.
At the time of the 1993 sale, the hospital district's directors said the facility could no longer compete with private facilities and was a drain on tax dollars. The hospital district remained in place to provide ambulance services and fund indigent healthcare.
According to the needs assessment, which was commissioned from a private consulting firm for $757,000, a 60-bed hospital would cost $30.6 million, while a 100-bed hospital would run $48.6 million. The district's board expects to receive final recommendations from the consultant in January.