Universal Health Services talked tough last week about physicians who invest in competing facilities while an HCA hospital in Idaho was sued for taking a tough stand against physician investors.
UHS, King of Prussia, Pa., said last week that it expects its earnings per share to be about 25% lower for the quarter ending March 31 than for the year-earlier period. Soft admissions, rising bad debt and competition in McAllen, Texas, and Aiken, S.C., are behind the expected shortfall, UHS said.
Meanwhile, four physicians filed a lawsuit accusing HCA's Eastern Idaho Regional Medical Center in Idaho Falls of illegally revoking their hospital privileges as punishment for their investment in a competing specialty facility. The board of trustees of the hospital voted earlier this year to revoke the privileges of the four doctors because of their partial ownership of 20-bed Mountain View Hospital, a for-profit surgical center. The doctors' lawsuit, filed in Bonneville County District Court, seeks permanent injunctive relief to prevent Eastern Idaho Regional from following through on its plan.
Open war between for-profit chains and physicians is not the norm. Investor-owned hospital companies typically stress their good relationships with physicians and usually offer better compensation packages and quicker decisions in recruiting than not-for-profit hospitals (March 17, 2003, p. 52).
While economic credentialing has been garnering more attention, said Steve Messinger, a consultant with ECG Management Consultants, it's still rare for hospitals to use "the death penalty scenario." ECG consults for both physicians and hospitals on their business relationships with each other. Hospitals have other means to combat physician competition, Messinger said, such as enforcing noncompete covenants in medical office building leases or threatening to terminate managed-care contracts with payers that sign contracts with physician-owned facilities.
During a conference call with healthcare stock analysts, UHS Chief Executive Officer Alan Miller said the company is recruiting new physicians to damage the business of physicians who compete with the hospital.
"What happens is, when they join a surgery center, they take the better-paying business there and they leave you with the lesser-paying business. When they see a patient that is not going to be a good reimbursed patient, they take that person to the hospital," Miller said. "We identify them, try to discourage them from doing this and then we recruit against them and try to take their patients away." Miller also said the company may purchase some ambulatory surgery centers in certain markets.
Competition with physicians is particularly pitched in south Texas, including McAllen, Miller said. "In order to try to fight back against that, we've talked a lot about economic credentialing and we have been more aggressive with our physicians," he said.
The competitive pressure faced by the company's Aiken (S.C.) Regional Medical Centers comes from hospitals in neighboring Augusta, Ga., which is home to a major academic medical center and hospitals owned by HCA and Ascension Health. Miller did not say whether UHS has implemented any economic credentialing requirements, and a spokeswoman said the company had no further comment.
Steven Campanini, a spokesman for Tenet Healthcare Corp., said that company does not use economic credentialing and feels little pressure from specialty facilities because its large medical centers tend to treat patients with greater acuity.
A Triad Hospitals spokeswoman said the company does not use economic credentialing but declined further comment.
HCA spokesman Jeff Prescott said the Idaho Falls case is the exception to the rule for the Nashville-based company. "From our standpoint, that's really something that you're going to do as a last resort," Prescott said.
The effective date of the privilege revocation, originally March 1, has been extended until June 30, said the plaintiffs' attorney, David Marx, of McDermott, Will & Emery.
-with Michael Romano