They're both right. The Good Hope scheme makes excellent business sense--if you don't care what it does to your health care system thereafter.
Here's the scene: Good Hope is a struggling not-for-profit hospital in Erwin, licensed by the state to have 72 beds but with an average daily population of 27. Betsy Johnson, also not-for-profit, is in Dunn. It's not in much better shape: licensed for 101 beds, ADP of 49. Erwin and Dunn are kissin' cousins in eastern Harnett, near I-95. The growth, if it comes, will be in western Harnett, just below the Wake County boomtowns of Fuquay-Varina and Holly Springs. There is no hospital in the west.
Enter Triad Hospitals Inc., a $4 billion for-profit corporation. It proposes to go into business with Good Hope, close it, and build a new hospital in Lillington--the west--with Triad owning 90 percent. Good Hope, however, would still own the vacant and pretty much useless Erwin facility.
The Lillington political crowd, led by Congressman Bob Etheridge and former U.S. Sen. Robert Morgan, both Democrats, are all for this, because Lillington today is dead in the economic water. A new hospital, Hoover Adams predicts, will spark a $100 million building boom there.
They're urging the state Division of Facility Services to approve Triad/Good Hope's application for a certificate of need, without which the new place can't be built. The decision is expected in a few days.
Over in Dunn, Betsy Johnson and the Chamber of Commerce want the application turned down. They predict that, if Triad gets the go-ahead, it will do to hospital services exactly what for-profit HMO's have done to the rest of medical care: It will cherry-pick the younger, wealthier southern Wake County market, desert the many older Erwin-Dunn folks who make less money and have no health insurance, and leave Betsy Johnson holding the unprofitable bag.
Betsy Johnson has assembled reams of evidence that this won't be just an unintended consequence of Triad's plan, it's the corporation's basic M.O. The same thing happened in Las Cruces, N.M., for example: Triad took over the weaker of two rural hospitals there, closed it, built a sparkling new one closer to town, and supplied spiffy offices for the "best-admitting doctors" who previously used both hospitals. Now the other hospital is running newspaper ads explaining why its revenues are down $11 million a year, forcing it to lay off staff and close facilities, including the charity clinic.
Indeed, Triad's investor information makes its strategy clear. It targets "small cities" in the West and South, courts "physician leaders," and "Generates Volume, Price, Margin." For the 63 hospitals and surgical centers it owns, it's pushed revenues up 7 to 10 percent a year recently; but it's pushed earnings up 15 percent a year. How? Dump the charity cases on the "other" hospital.
This is pure capitalism, of course. Triad brings the investors' cash these aging hospitals seek, but the price is that its shareholders want that 15 percent return (or 17 percent, the corporate target). And CEO James D. Shelton wants his $3.9 million a year salary.
All in the family: Triad's motives are clear, but what about Good Hope, a non-profit with the community's interests presumably at heart? Ahem. For the past 10 years, Good Hope has been managed by Quorum, a for-profit firm. Previously part of the giant HCA Corp., Quorum was spun off when HCA needed cash to pay a $1.7 billion federal fine on kickback and fraud charges. Triad is also an HCA spinoff.
Then in 2002, Triad bought Quorum--which makes Good Hope's CEO, Don Annis, both a Quorum employee and--now--a Triad employee. "Therefore," says Adam Searing, head of the N.C. Justice Center's Health Access Coalition, "the company that wants to buy and convert Good Hope is the same company running the non-profit now." Searing and others question whether Triad drove the best bargain in selling Good Hope to itself for just seven times earnings--a bankrupt West Virginia hospital went for 13 times earnings--and whether other bids were sought.
"It seems like Triad has the inside line, and that may be bad for everyone," Searing says.
They also wonder why Triad/Quorum/Good Hope rejected the recommendation of a consultant--hired jointly by Betsy Johnson and Good Hope prior to Triad buying Quorum--that the two hospitals merge and improve their efforts in western Harnett together.
Should the state approve Good Hope's plan, these will be questions for state Attorney General Roy Cooper, whose job it is to make sure non-profits don't sell out the public interest--that's the whole point of their tax-free existence. Not incidentally, Quorum currently manages 11 other rural N.C. hospitals, including facilities in Granville and Franklin counties.