Less than hospitable

If Columbia/HCA buys Roger Williams Medical Center, uninsured patients may be forced to go elsewhere

by Jody Ericson

When Columbia/HCA Healthcare Corporation acquires a new hospital, it often distributes a booklet to its new employees. Called "A Matter of Fact," the booklet promises to "separate myth from reality" in the debate over for-profit takeovers of nonprofit hospitals. The only problem is, the more you read the booklet, the more blurred reality becomes.

The sources of many of the studies Columbia/HCA cites in the publication, for instance, are somewhat biased. One called the Advisory Board Company describes itself in press materials as a "strategic" research firm serving "2500 of the world's largest and most progressive private-sector organizations."

It seems that for every study pointing to the flaws of for-profits running hospitals, Columbia/HCA, which is in the process of purchasing Roger Williams Medical Center in Providence, hands over another highlighting the merits.

Of course, as the health care industry becomes more cost-conscious and competitive in response to pressure from managed-care institutions, a nonprofit hospital like Roger Williams does have legitimate reasons for wanting to cast its lot with Columbia/HCA, which now controls nearly half the for-profit beds, and seven percent of all hospital beds, in the US.

Columbia/HCA has much greater purchasing power than stand-alones like Roger Williams, a financially struggling institution whose life expectancy is an estimated five years. When Columbia/HCA acquires a hospital, it also streamlines services, and sometimes its bottom-line approach results in the elimination of overlapping programs.

An argument could even be made that like any shrewd corporation, Columbia/HCA would maintain the quality of care at Roger Williams to retain customers and attract new ones.

What the studies can't refute, though, is a kind of intuitive logic. In order to make a profit, Roger Williams, or any other hospital Columbia/HCA acquires, would have to cut back on treating certain money-losing patients -- the uninsured and elderly, for instance -- and eliminate money-losing procedures. Since 11 percent of the state's population (some 110,000 residents) is uninsured, community activists and politicians like US Congressman Patrick Kennedy are particularly concerned about this aspect of the buyout.

Even though state regulations would require Columbia/HCA to continue to provide the same level of charity care as Roger Williams has over the last three years and even though Columbia/HCA would set up a $35 million charitable foundation to continue the hospital's community health services, both the law and the foundation could slip through serious loopholes.

What's more, if Columbia/HCA does buy Roger Williams, which its president says is one of the most charitable hospitals in the state, the corporation would not be obligated to keep the medical center open if it starts to lose money.

Robert Kuttner, a syndicated columnist whose work on political economics appears in a number of newspapers such as the Boston Globe and Washington Post, co-edits the American Prospect, a bimonthly policy magazine based in Cambridge, Massachusetts. In his landmark two-part series on Columbia/HCA in the New England Journal of Medicine last August, Kuttner says that nonprofit institutions "embrace a social ethic, serving uninsured patients, taking Medicaid losses, not insisting that every admission or procedure be profitable." But in a "purely for-profit enterprise," he says, "there is no place for uncompensated care [or] unprofitable admissions."

In its first year at Roger Williams, Columbia/HCA, whose 1995 profits were just under $1 billion, is predicting a 340 percent gain. At the same time, the Nashville-based corporation says it would up the number of charity cases the hospital treats. To Congressman Kennedy, the two claims seem contradictory.

"Common sense says that you don't make a system already suffering better by squeezing out money and putting it into someone's pocket instead of into the institution." For-profit chains, says Kennedy, abide by the "brutal law of the jungle. It's survival of the fittest, and people who have the power are the ones without the heart."

Interviewed at his office in the state Department of Motor Vehicles building in Pawtucket, Kennedy, who supports state legislation that would ban for-profit hospitals in Rhode Island altogether, says too many people have succumbed to the hysteria surrounding today's health care industry. "There's this environment of fear over the downsizing taking place as a result of the rise of managed care," he says.

Rather than trying to fix the system as a whole, hospital officials are "throwing up their hands," says Kennedy, and giving in to for-profit corporations or aggressive nonprofit networks like Lifespan, which now represents nearly half the hospital system in the state, including Rhode Island and Miriam hospitals in Providence.

"There's this broad disclaimer now -- you have to do it [merge or be acquired] because everything's going to hell," says Kennedy. "We shouldn't say that because the public sector can't handle these problems, we should turn it over to the private sector."

Because he has been so vocal in his opposition to Columbia/HCA, the Democratic congressman has been criticized for taking too active an interest in a local issue. But Kennedy is not just concerned about Roger Williams, which would become the state's first for-profit hospital after the acquisition. Columbia/HCA has a track record, he says, of entering a state and then cornering its hospital market.

Already, the corporation has engaged in discussions with Kent County Memorial Hospital in Warwick, the state's busiest hospital after Rhode Island, and Women & Infants and Butler hospitals in Providence. If any of these talks prove fruitful, many more of Rhode Island's poor and uninsured could become medically homeless, says Kennedy.

`Cherry-picking' profitable admissions

To date, most objective third-party studies point to a trend of for-profits like Columbia/HCA providing less charity care than their nonprofit counterparts and possibly even "cherry-picking" profitable admissions.

Studying 116 hospitals in Columbia/HCA's home state of Tennessee, Modern Healthcare, a weekly magazine for hospital administrators and department heads, found that in 1993, the corporation's nine hospitals posted an uncompensated care rate below the statewide median. Seven of the nine even fell below the median for investor-owned hospitals.

In recent years, Columbia/HCA also paid thousands of dollars to settle federal patient dumping charges after its hospitals were accused of discharging patients before properly screening them.

In an attempt to avoid such scenarios at Roger Williams, state Representative Gerard Martineau (D-Woonsocket) has introduced legislation that would require all hospitals, both nonprofit and investor-owned, to provide "essential medical services to all persons regardless of their ability to pay." The only drawback to this is that hospitals can "skim cream" long before a patient walks through the door.

Through clever marketing, officials can target desirable patients and steer away others. According to several published reports, Columbia/HCA also encourages local physicians to invest in its hospitals, which would give the doctors a built-in incentive to refer financially lucrative patients to a Columbia/HCA facility.

In Florida, a review of admissions at a Columbia/HCA-owned hospital in Miami, which has since closed, pointed to this possibility in 1993. In a draft of a report that was never released, the state's Agency for Health Care Administration found that Medicare patients referred by Columbia/HCA-affiliated doctors stayed fewer days at the Miami facility than those the doctors referred to other hospitals.

The assumption was that the conditions of those patients sent to the Columbia/HCA-owned hospital were the least complicated and, thus, most profitable.

In Denver, chief executives of two nonprofit hospitals recently complained to their City Council that they've had to shoulder a growing share of patients who can't pay since Columbia/HCA merged with a group called HealthONE and captured an estimated 33 percent of the Denver hospital market two years ago. "I don't have any trouble coming to the conclusion that we're being dumped on," Dennis Brimhall, president of the nonprofit University Hospital, told the Denver Post.

A spokeswoman for Columbia-HealthONE denied the accusation, saying that in 1995 Columbia-HealthONE's six acute-care hospitals in Denver provided about $45 million in uncompensated care.

The estimate surprised the other hospital officials, who mused that the spokeswoman "must have made a rounding error," C.L. Harmer, public affairs director for the nonprofit Denver Health Medical Center, told the Phoenix. "I could never figure out how they got that number. This could be their marketing budget for all I know."

When confronted with such allegations against Columbia/HCA, Robert Urciuoli, president of Roger Williams, tends to dismiss them as "isolated incidents." The real problem, he says, is that Columbia/HCA -- and by extension, Roger Williams in Rhode Island -- has become a poster child for everything that is wrong with America's health care system.

"For-profit medicine all of a sudden has become an ill in the system that Columbia and Roger Williams have to address," says the beleaguered president. "I'm not happy with the way things have gone either. Remember, I'm a consumer too."

But unlike Kennedy, Urciuoli says it's too late for a statewide overhaul of the system. "Four or five years ago, I thought that the health care industry in this state could've flourished under a stricter regulatory process. Had the state and hospitals come together then, maybe we could've worked things out," he says. "But it's like Humpty Dumpty. Once the egg is cracked, it's difficult to go back and fix the system."

Across the nation, stand-alone hospitals have become a thing of the past. Even in Rhode Island, most have merged or are actively looking to do so, making it difficult for Roger Williams to compete. Indeed, critics have accused Lifespan of being just as aggressive and cost-conscious as its investor-owned counterparts.

Besides, says Urciuoli, Roger Williams tried to form alliances with other hospitals years ago and was essentially shut out. He explains that when Rhode Island and Miriam hospitals joined to form Lifespan in 1993, Urciuoli had been talking with Miriam about a possible merger with Roger Williams.

Since Miriam decided to instead go with Rhode Island Hospital, "my phone hasn't rung once," says Urciuoli.

Regardless of the politics behind the state's shrinking health care market, the president says Columbia/HCA is more than willing and able to provide free care at Roger Williams. Part of the $51 million sale price, he explains, would go toward paying off the medical center's $35 million debt.

This would save Roger Williams about $5 million a year in interest -- the amount it now spends on uncompensated care. "In my mind, the only difference between a for- or nonprofit hospital is whether I pay taxes or not," says Urciuoli.

`A regulatory dog with no teeth'

The president also mentions a state law that requires any hospital being sold to a for-profit corporation to provide a level of free care equal to the hospital's average over the previous three years. But Kate Coyne-McCoy, executive director of the Rhode Island chapter of the National Association of Social Workers, calls the law "a regulatory dog with no teeth."

The Department of Health (DOH) "would be hard pressed to pull a license because of a drop in charity care," she says.

Prior to the Phoenix's interview with Urciuoli, public relations employees at the hospital supplied the newspaper with figures indicating that in the last three years, Roger Williams spent an average of $5 million annually on free care and "uncollectible amounts," or patient debt. (The $5 million total is known as "uncompensated care.")

When asked, the employees said they couldn't separate out the free care figure from the rest of the sum. But on a recent state Department of Health questionnaire, Roger Williams officials did this very calculation. In 1994 and 1995, about $1 million of the $5 million went toward free care. But from 1995 to 1996, the level of free care alone dropped about 50 percent -- from $942,464 to $462,496.

Given this, Coyne-McCoy accuses the hospital of cutting its free care last year in anticipation of the sale -- and the clock's starting to tick on the three-year average law.

Urciuoli calls the allegation "totally inappropriate and inaccurate." He says that "there were no manipulations, no changes in the policy." Still, he is at a loss to explain the sudden, dramatic drop. Urciuoli mentions an improving local economy and Roger Williams's efforts to "work with agencies to get patients eligible for financial reimbursement" as possible reasons.

But if the economy is to blame, not every hospital enjoyed a windfall in 1996. According Rick Piester, manager of communications and public affairs at Lifespan, Rhode Island Hospital actually spent $1.3 million more on free care last year than in 1995; Miriam spent about $30,000 more.

Today, Governor Lincoln Almond and DOH officials are proposing that a hospital's level of free care be based on an average of five years instead of three. Coyne-McCoy, also a leader of a local coalition of community and labor groups called Not For Profit, would rather see a law requiring hospitals to commit a percentage of their revenues to charity care.

This would force them to keep pace with the increasing number of uninsured people as a result of government cutbacks in medical coverage, she says.

According to Urciuoli, Columbia/HCA would "abide by any standard" as long as "the playing field is leveled." The present state law concerning free care, for instance, applies only to for-profit hospitals. It should apply to everyone, says Urciuoli.

In 1991, the Catholic Diocese of Providence closed the emergency room at St. Joseph Hospital in South Providence. "There are a lot of indigent patients in that area," Urciuoli points out, "and St. Joseph ended up saving a lot of money."

Local hospitals also use different standards for defining free care versus uncollected amounts, according to Urciuoli. Roger Williams uses the poverty level as its cutoff line. Anyone above this income level who doesn't pay is lumped into the "bad debt" category.

Other hospitals' cutoff line is twice the poverty level, so what is bad debt for Roger Williams could be reported as free care at another hospital, says Urciuoli. What the Roger Williams president wants is one standard for everyone.

Getting what's already ours

In addition to its commitment to continue providing free care, Urciuoli says Columbia/HCA would "give to the community a free asset back." He explains that part of the proceeds of the sale would be used to set up a $35 million charitable foundation, which would be separate from Columbia/HCA and would promote health education, research, and other community health services.

But what Urciuoli neglects to mention is that the corporation would be required to do so by laws governing nonprofits' conversions to for-profit. "They make it seem as if they're doing this [creating a foundation] out of the goodness of their hearts, but that's our money," says Coyne-McCoy.

She mentions all the charitable donations and foregone taxes that have gone into Roger Williams. Hospital officials just couldn't use this money as they wished.

Also, while Attorney General Jeff Pine does have statutory authority to review such conversions, no one really knows how much control he'd have over the foundation in the future.

As Kuttner points out in the New England Journal of Medicine, another up-in-the-air question is whether such foundations could even "pursue purposes other than health care."

Even Urciuoli admits there is controversy over how foundations set up by Columbia/HCA have spent their money. "I guess one of the foundations went out and bought planes and provided free flying lessons to kids," he says.

That wouldn't happen at Roger Williams, though, because several of the hospital's trustees plan on joining the foundation. And they'd be on the alert for such excesses, says Urciuoli. "We're going to take the money the community has given us and allow the community to decide how it should be used," he says.

But such personal assurances aren't enough for Kennedy, who'd rather see the $35 million go to an outside, independent party like the Rhode Island Foundation.

Today, Kennedy, along with US Senator Jack Reed and Congressman Robert Weygand, is co-sponsoring federal legislation called the Medicare Non-Profit Hospital Protection Act. Introduced by Congressman Peter Stark (D-California), one of the leading authorities in Congress on health care issues, the act would establish a federal approval process for the acquisition of nonprofit hospitals and for the resulting charitable foundations.

As a final argument for Columbia/HCA's takeover of Roger Williams, Urciuoli says the hospital would give back to the community in another way -- in an estimated $1 million in taxes to the city of Providence and $750,000 to the state, every year.

But since one out of every two dollars in the heath care industry is public tax dollars, Rhode Islanders would essentially be getting back their own money, says Kennedy. "Also, I don't want to be fighting for money in Washington, for Medicare and other programs, just to see it go back to Tennessee," he says.

Likewise, Kennedy says that Roger Williams is a "public trust" whose value is incalculable. "This hospital has one of the top ten cancer treatment and research centers in the country," he says. "So if Columbia/HCA can make a 300 percent profit on it in the first year, then we should be able to take what's best about Roger Williams and keep the hospital open to the public."

Jody Ericson can be reached at jericson[a]phx.com.