During its muscle-flexing heyday in the mid-1990s, Columbia/HCA Healthcare Corp. developed a well-deserved reputation for hard-nosed business tactics, pressuring managed-care companies to exclude its rivals from the insurers' networks and preventing physicians with staff privileges at competing hospitals from investing in for-profit ventures with the Nashville-based giant.
Now, HCA, which continues to cast a long shadow across the healthcare landscape under a different moniker and revamped management, is being accused of the same slash-and-burn tactics of old.
Physician-owned Heartland Spine & Specialty Hospital, Overland Park, Kan., alleges that HCA Midwest Division, a wholly owned subsidiary of for-profit HCA, spearheaded a systematic conspiracy to pressure managed-care companies to boycott Heartland over the past two years and drive it out of business. HCA Midwest, which controls about one-third of all the hospital beds in the metropolitan area, joined with other hospitals in the Kansas City metro area -- which straddles the Kansas-Missouri border -- to persuade a host of insurers to exclude the surgical hospital from their networks, an 18-page complaint alleges.
"The major hospitals, led by HCA, conspired to try to put Heartland out of business," said Norman Siegel, a lawyer for the specialty hospital and a partner with Stueve Siegel Hanson Woody. "We've gotten a lot of feedback from managed-care companies we sought contracts with that the limitation on their ability to include us in their networks was a direct result of instructions provided by the major hospitals in this area."
Regardless of the lawsuit's outcome, the dramatic charges under the Sherman Antitrust Act are turning up the heat in an already costly and increasingly bitter battle between specialty facilities and community hospitals. Legal observers suggest that the charges, which HCA denies, could play a role in a debate that both sides have framed as a fight for survival.
"I think it'll have a real impact," said Paul Danello, a healthcare lawyer with Ropes & Gray who has served with HHS' inspector general's office. "It indicates that there is such a level of fear and uncertainty on the part of both specialty and community hospitals that one can see increasingly aggressive action on the part of both sides. The temperature is rising to the point that I think either the courts or the legislature has to step in."
Siegel suggested that the alleged conspiracy by HCA, the largest for-profit hospital company in the nation with 190 facilities, is in keeping with the chain's longtime enmity toward specialty hospitals. "They absolutely did this," Siegel said. "It's consistent with the way they've dealt with these hospitals and the statements they've made in other markets."
HCA Midwest spokesman Rob Dyer called the lawsuit "ridiculous," adding, "There is no merit to their allegations."
HCA burst upon the Kansas City hospital market in April 2003, when it paid $1.1 billion to buy not-for-profit Health Midwest. "We talk (to insurers) about our rates and our hospitals," Dyer said of his division and others within the company's network. "And negotiating exclusive contracts with managed-care companies is pretty common. But we just address our hospitals and our systems."
The lawsuit, filed April 26 in U.S. District Court in Kansas City, Mo., under the hospital's legal name, Heartland Surgical Specialty Hospital, is another example of the battle raging between full-service community hospitals and specialty facilities focusing on high-margin services like orthopedics, surgery and cardiac care.
In Idaho, four physicians last year filed a still-unresolved lawsuit charging HCA's Eastern Idaho Regional Medical Center in Idaho Falls with illegally revoking their hospital privileges after the doctors invested in a competing specialty facility.
For both sides, the next big battle will be in Congress, whose 18-month moratorium on physician self-referral to doctor-owned specialty hospitals will expire June 7. The Medicare Payment Advisory Commission has recommended extending that ban through Jan. 1, 2007, a suggestion that most observers believe will be followed by federal lawmakers.
Heartland, owned by about two dozen physicians, opened its doors in September 2003 to the bright promise of a steady stream of customers lured by what was billed as "unmatched" medical care and state-of-the-art equipment. But the $22 million hospital, which was licensed for 48 beds, has never had a daily census higher than 19 patients, said William Reed Jr., an orthopedic surgeon who is board chairman of the hospital, which opened about six months after HCA bought Health Midwest.
Reed, who described the lawsuit as a "last resort," said he and his partners, including Medical Director Peri Ananth, recognized that the new hospital had a problem "when we stopped having any phone calls returned from commercial (insurers). Our continuing attempts to contract, to keep negotiations going, just went nowhere."
The 44,000-square-foot facility is struggling to survive after HCA Midwest and other area hospitals -- including three-hospital St. Luke's Health System, Kansas City, Mo., and Carondelet Health System, St. Louis -- shut off the flow of patients through a conspiracy with six managed-care companies, the complaint alleges. Three of the six insurers named as defendants -- Blue Cross and Blue Shield, Coventry Health Care of Kansas City and United HealthCare -- control more than three-fourths of the local market.
"Upon questioning from Heartland," according to the complaint, "the insurers have admitted that they have succumbed to the pressure of the coordinated conduct of the hospital defendants -- the largest suppliers of acute-care services in the area -- and agreed to deny Heartland in-network contracts."
According to the complaint, Blues official Randy Meyer toured the facility about a month after its opening. He complimented the owners on its "quality" and then denied a request for an in-network contract, "explaining that existing network hospitals, including defendant HCA, had instructed the Blues not to offer Heartland a contract, and that the company was yielding to that pressure."
In a statement, the Blues, the market's largest managed-care insurer with about 800,000 members, said it "believes the allegations of this lawsuit are baseless. We absolutely did not conspire with hospitals and insurance companies."
Of course, tough negotiating tactics by dominant community hospitals seeking to maintain or build their market share are nothing new, and niche facilities have had varying degrees of difficulty in landing network deals, said Randy Fenninger, a lawyer and lobbyist for the American Surgical Hospital Association.
"Usually what happens is that one hospital goes to its managed-care partners and says, 'This is the freebie or discount I'll give you if you won't deal with anyone else,' " Fenninger said. "What's unusual is where you have evidence of all the general hospitals around town getting together. I've never heard that happen. I have never had any member say, 'Yeah, all the (acute-care) hospitals jumped on us' " by pressuring managed-care outfits to exclude them.
Ananth, Heartland's medical director, said it's bewildering to him that insurers would choose to freeze out a facility "that provides high-quality, high-tech care to patients without adding more strain on the healthcare dollar."
Kansas, which has no certificate-of-need law and offers a more welcoming malpractice insurance climate than neighboring Missouri, has become one of the battlegrounds in a healthcare war that continues to heighten tensions between hospitals and doctors. "It's another example of the tension that's out there in a lot of communities where hospitals and specialty hospitals are trying to survive," said Samuel Turner Sr., president and chief executive officer of Shawnee Mission Medical Center, Merriam, Kan., and the only leader of one of the defendant hospitals to respond for this story. "They're really going after each other."
Turner, who said his facility has worked with physicians for years, including a partnership on an ambulatory surgery center, noted that factors like the absence of a CON and the fast-growing population in Johnson County have created a "fertile ground" for this hand-to-hand combat in community healthcare. As for the lawsuit, he said, "It has no merit," adding that it's farfetched to believe this kind of collusion between so many parties could take place in today's unforgiving regulatory environment. "No one would be foolish enough to have those conversations," he said.
Of the 100 or so specialty hospitals spread across 28 states, two-thirds are in seven states-Arizona, California, Kansas, Louisiana, Oklahoma, South Dakota and Texas. Kansas is home to scores of ambulatory surgery centers and about 10 niche facilities, including another owned primarily by physicians, 10-bed Doctors Specialty Hospital in the Kansas City suburb of Leawood. Calls to that hospital were not returned. A doctor-owned bariatric hospital is also set to open in the Kansas City market.
The hostilities even extend to ambulatory surgery centers. Last year, Siegel said, physician-owned South Kansas City Surgicenter, Overland Park, struggling with the same dearth of managed-care contracts as Heartland, formed a partnership with St. Joseph Health Center, Kansas City, Mo., an affiliate of Carondelet, one of the defendants in the Heartland lawsuit. HCA owns two ambulatory surgery centers in the Kansas City market that were part of its Midwest acquisition, and Carondelet's parent, Ascension Health, is working with United Surgical Partners International to develop a string of ambulatory surgery centers across its 67-hospital network.
Meanwhile, in Wichita, Kan., a similar pattern has emerged, triggering a bruising rivalry there. HCA faces competition there from specialty facilities like 46-bed Kansas Heart Hospital, whose co-founder, cardiologist Badr Idbeis, is planning a 70-bed surgical hospital in Andover, Kan., a fast-growing suburb east of Wichita. That facility will be a general hospital with an emergency room, officials said.
This kind of intense competition, some observers said, helps explain the equally fervent reaction from many community hospitals and systems, including HCA, whose one-time flagship, Wesley Medical Center, is now competing with limited-service facilities in Wichita. Aside from its tough tactics against doctors in Idaho, HCA is helping plot out and underwrite expensive lobbying efforts against specialty hospitals, and has not been shy about complaining formally to CMS officials about instances in which planned surgical hospitals have attempted to circumvent the federal moratorium.
"HCA has really been strident," said Jim Grant, chief operating officer of National Surgical Hospitals and president of the surgical-hospital trade group. "If you know anything about their history, they've been vilified as the 'robber barons' of healthcare."
"We've always said that competition was good. Oddly, that was HCA's line 10 years ago. It's just amazing duplicity," Grant said.
Tom Bell, president and CEO of the Kansas Hospital Association, said the lawsuit is focusing attention on efforts to change payment systems that penalize community hospitals.
"This case," he said, "is symptomatic of a public policy issue we've got because of a payment system where these limited-service facilities get reimbursed at the same rate as full-service hospitals, yet they don't provide emergency services, a high level of Medicaid or (care for) the uninsured. This is something that Congress and state legislators are looking at, and, ultimately, that is exactly where the solution is going to lie -- not in the courts."