In spite of costly efforts to stifle it, competition could be back in Poplar Bluff, Mo. More than two years after Tenet Healthcare Corp. spent $40.5 million to buy Doctors Regional Medical Center and merge it with its own Lucy Lee Hospital, a local physicians group and a Roman Catholic hospital 90 miles away are saying the town can support a competing hospital. And they plan to build it.
The development comes after Santa Barbara, Calif.-based Tenet won a highly publicized and expensive 1999 antitrust trial and appeals process to protect the merger, overcoming opposition from the Federal Trade Commission, which in January 2000 dropped its complaint.
After the court battles and millions of dollars in attorneys' fees, a 39-physician practice in Poplar Bluff now plans to form a joint venture with a Cape Girardeau, Mo., hospital to build a new 35-bed, for-profit facility in Poplar Bluff, pending certificate-of-need approval. Saint Francis Medical Center, a 264-bed Catholic hospital, would have a 30% ownership stake in the project with the remaining 70% stake coming from the Physicians Advanced Healthcare Group. The proposed $30 million facility would be on a 32-acre site within two miles of the former Lucy Lee and would include a cardiac catheterization lab, ambulatory surgery center and medical office building.
The battle brewing in southeast Missouri has all the elements of a classic David and Goliath slugfest. Poplar Bluff business leaders, patients and physicians said the motivations for building a new hospital range from physician jealousy and painful merger scars to community frustration over allegedly inadequate hospital services and escalating healthcare costs. Local physicians said they fear patient migration will have an adverse impact on their income and erode the local patient base. At its heart, some said, the hospital proposal could be the result of a national company using big-city business practices that just won't fly in small towns such as 17,000 population Poplar Bluff.
Saint Francis is a stand-alone hospital that earned a $7 million profit on 2001 revenue of $216.1 million, with a 5.8% operating margin. Although Tenet may be headquartered far away, its merged hospitals, operating under the name Three Rivers Healthcare, is the largest employer in Poplar Bluff.
Saint Francis President and Chief Executive Officer Steven Bjelich said Poplar Bluff business leaders and physicians approached the hospital last year to explore collaborating on a hospital.
"When you have 39 physicians, the majority of physicians in Poplar Bluff, that's a pretty powerful statement about our ability to partner with doctors," he said. "Physicians in Poplar Bluff are telling me they don't have a voice. We listened."
Bjelich said Poplar Bluff patients have gone from representing 10.6% of Saint Francis' total visits to making up 12.7% of visits in less than three years.
"This is not about Tenet," he said. "This is about a group of physicians seeking a provider partner to meet the needs of area patients."
Some might deem that statement ironic because Saint Francis and its Cape Girardeau competitor, 223-bed Southeast Missouri Hospital, announced a merger in October 1998, only to scuttle it in January 1999. Bjelich, who arrived after the Saint Francis board voted down the merger, said competition works.
"There are no regrets (about the failed merger attempt). Competition has been very positive for the community and elevated the standard of service and the quality and level of care in Cape Girardeau," population 36,000, he said. He pointed to new obstetrics programs, a neonatal intensive-care unit and expanded services. He hopes to exert the same influence in Poplar Bluff.
"We're not afraid of a spending war with Tenet," he said. "They've always been a potential threat. We'll compete based on quality and price."
Saint Francis has created a for-profit corporation, Saint Francis Health Development Services, to operate its minority interest. Bjelich said he would like to submit the CON application later this year, with construction to begin immediately after approval.
Tenet spokesman Harry Anderson said Tenet will "vigorously oppose" the CON application. He said hospital competition hasn't worked in Poplar Bluff, and that the occupancy rates of Doctors Regional and Lucy Lee hovered around 50%. "The town couldn't support two hospitals before, and I don't know what's changed," he said. "Because of the competition between the two, neither one could afford to invest capital into service enhancements, so we combined them under common management."
The merger has slowed the tide of patients leaving town for care, Anderson said, and added he expects the trend to continue as Tenet launches new services. Tenet has added cardiac services, an ICU and a women's health center to its Poplar Bluff hospitals, he said.
"We don't believe the prices in Poplar Bluff are out of line," he said. "We have not imposed significant price increases in that market."
Some Poplar Bluff doctors disagree. Ray Peters, D.O., an oncologist and one of the prospective investors, said Tenet fueled acrimony about the merger by courting the staff at Doctors Regional. Peters said Tenet financially rewarded the physicians and staff there while ignoring doctors at Lucy Lee, where he once worked, and laying off large numbers of employees.
Jeffery Bush, CEO of Physicians Advanced Healthcare Group, said doctors are frustrated that Tenet has not provided services patients seek outside Poplar Bluff.
"Once patients leave the community and establish rapport with doctors elsewhere, it's hard to get them back," Bush said.