Yet another skirmish between hospitals and physicians ended last month with a familiar finale: a white flag, lawsuits and resignations.
One week after breaking ground on a 140-bed, $150 million acute-care hospital in Lafayette, Ind., the 82-year-old Arnett Clinic, which does business as Arnett HealthSystem, halted its project. On the same day, the president and chairman of the 156-physician practice, Jeffrey Brown, and its chief executive officer, Fred Titze, announced their resignations, effective Oct. 31 and Aug. 31, respectively. Last week the system, which is composed of a multispecialty physician group and its 62,000-member Arnett Health Plans, named Michael Skehan president and chairman to replace Brown, effective Aug. 9.
Arnett's decision to halt the project came after a dispute with some of its own physicians and opposition from Greater Lafayette Health Services, or GLHS, owner of the only two acute-care hospitals in Lafayette. Brown and Skehan are both Arnett physician members.
"While the vision of an Arnett Hospital is correct for our patients and our community, the roadblocks orchestrated in recent weeks by Greater Lafayette Health Services make it impractical to proceed with the project at this time," Brown said in a news release. "GLHS has been better at destroying than Arnett has been at creating this vision of fully integrated, patient-centered, physician-directed healthcare in our community."
Chicago healthcare lawyer Scott Becker of the firm McGuireWoods said this type of hospital-physician competition battle usually occurs in small or midsize markets.
"We're seeing these all over the country, particularly in smaller communities where one hospital or system has a monopoly and perceives it would be hurt by a competitor," Becker said. "In big cities, no one facility would be too impacted by a project like this."
Not-for-profit GLHS, which is part of Mishawaka, Ind.-based Sisters of St. Francis Health Services, has conducted a "very effective public relations campaign based on falsehoods that have wrongfully discredited the leadership of Arnett at a particularly critical time in financing the hospital project," Brown said in the news release.
GLHS President and CEO Terry Wilson did not deny the system's opposition.
"We have been pretty open and honest that we thought it was a bad idea," Wilson said. "We think another hospital would spread thin precious human resources, add huge amounts of capital costs and debt to both systems, and that both GLHS, Arnett and the community would pay for it all."
GLHS was formed by the 1998 merger of 280-bed Lafayette Home Hospital and 205-bed St. Elizabeth Medical Center. The Arnett Clinic dates back to 1922 and has enjoyed a long relationship with both GLHS hospitals.
But in August 2003, Arnett's board approved the proposal for a for-profit hospital and later publicly announced it, igniting the conflict. Titze said Arnett hired a hospital administrator and chief medical officer, contracted with architects and financial advisers, received an OK on financing, cleared the land and began site preparation. "We were pretty far along the way," he said.
Not only did GLHS publicly express its opposition, but it played hardball with Arnett, terminating a radiology service contract and provider agreement with the Arnett HMO. Brown said the hospitals sent letters to local businesses disparaging the project.
In January, 40 Arnett physicians sent a letter to the clinic's board opposing the construction of the hospital. The dissident Arnett physicians' Indianapolis attorney, Michael McMains, said Brown and other clinic administrators "hijacked the decision-making of this entire medical practice through the use of intimidation, deception and even threats to impugn the personal reputations of any Arnett physician who opposed them."
On July 6, 15 Arnett physicians filed a 28-page civil suit in Tippecanoe County (Ind.) Superior Court to block the project and dissolve the physician practice, alleging that Brown, Titze and other executives and board members illegally pursued the hospital project without consulting or seeking authorization from the physician shareholder members. The suing physicians also said Brown failed to tell Arnett physician shareholders of a buyout offer from St. Elizabeth to purchase the practice and the clinic. Five more Arnett physicians joined the suit in mid-July, constituting about 15% of the physician owners. Arnett countersued.
The future of Arnett and the status of the lawsuits are unknown, McMains said. Brown and Titze declined to comment on their resignations or future plans.
Becker predicted more of these kinds of fights. "In some communities the hospitals have tried to partner with the doctors," he said, "while in others the hospitals have taken a scorched-earth policy."