ON THE COVER North Coast Journal Weekly

Does Humboldt need a boutique hospital?


ANYBODY SURVEYING THE HEALTH CARE LANDSCAPE of the North Coast -- not to mention the rest of the country -- is bound to be getting queasy. Costs and insurance co-payments are

&nbsp&nbspup. Payments to doctors and hospitals are going down. HMOs have pulled out. Hospitals threaten to close. Doctors are going into real estate.

Panic attacks, anyone?

Add this to the list of changes: A group of Humboldt County surgeons is putting together plans for a controversial new "boutique hospital" in Eureka -- a place where you can get your hip replaced or your gallstones removed with better care and at no more cost than a hospital would offer.

That, at least, is the word according to the proponents of such schemes. Critics say it may put the full-service hospitals out of business and call the surgeons behind it a bunch of selfish money-grubbers with an anemic sense of ethics.

The "specialty surgical hospital," as it is formally known, would perform only scheduled elective surgeries -- other services, such as emergency care, would be left to the existing hospitals. It would be built in part with money from physicians themselves, some 15 to 20 of whom have agreed to invest anywhere from $7,500 to $30,000 in the project. At least half of the money, as well as the management know-how, would come from a Chicago-based company called National Surgical Hospitals, which runs 15 other such facilities throughout the country.

The advantages for the surgeons are many. Without the distraction of an emergency ward -- where very sick patients needing immediate help tend to mess up surgical schedules -- doctors can run a much more efficient operation. If they come in as founding partners, they can share in the profits -- making as much as a 25 to 30 percent return on their investment per year, according to the National Surgical Hospitals Web site.

Local control

But most attractive to Dr. Greg Gibb -- one of the founding members of the new facility -- is the prospect of a hospital that would be controlled locally, by himself and his colleagues in Humboldt County. They would have a say in its design, its equipment and its management. That isn't the case with St. Joseph Hospital, owned by St. Joseph Health System in Orange, he said.

"I don't feel in partnership with this hospital the way I felt I was in partnership with General Hospital," the ophthalmologist said. "With General Hospital, I thought that my view was sought out and listened to. It's just not true with the St. Joseph administration. They take orders from Orange County and they do their thing. It's just not the same.

"It's not a bad hospital. The people who run St. Joseph Hospital are good people. We wish them well. We want them to succeed," he said. But to have only one hospital in town is "not good for choice. It's not good for local control."

Bonnie Cyr, business manager at Humboldt Orthopaedic Associates Inc. in Eureka, said she has been acting as the secretary of the group of founding members, which also includes orthopedist Dr. Ray Koch. Cyr told the Journal that the project is in the "planning and discussion" stage. "It isn't real yet," she said.

But according to Gibb, it's very real. The partnership is negotiating to purchase a site behind the Eureka City Schools office. Groundbreaking could happen within months, and from there, it will be 20 months until the new hospital opens, at a cost somewhere under $20 million, he said. "I don't see any reason why it's not going to happen." Other founding members declined to be interviewed on the subject. They include, according to Gibb, a number of orthopedists, as well as physicians in the fields of podiatry, neurosurgery, general surgery and gynecology.

A nationwide phenomenon

Boutique hospitals may be new to Humboldt County, but they have been sprouting up throughout the nation in recent years. Specializing in areas such as orthopedics, cancer treatment, rehabilitation and cardiac care, these physician-owned facilities often feature lavish furnishings such as leather furniture and fine artwork. They endeavor to pamper their patients, offering luxury linens and special meals that can be ordered from a menu. "We call our patients `guests,'" an official with a new boutique hospital in south Arlington, Texas, was quoted as saying.

The trend has been met with alarm in some quarters. Hospitals in Ohio, Idaho, Wisconsin, and Fremont, Calif., have fought vigorously to protect their turf against the boutique invaders.

Here in Humboldt as well the prospect of a new hospital is being greeted, by some, about as warmly as the arrival of a deadly new virus. "From the standpoint of the community, it's a disaster," said one surgeon not involved in the project, who asked that his name not be used. Such a facility would provide some of medicine's most profitable services, leaving the community hospitals with fewer of those big payers to offset money-losing departments like the emergency room. "It's the perfect model to siphon off the cream of the medical community," agreed another.

It also goes against the idea that physicians have a responsibility to the community at large, rather than just their own patients, said Dr. David Gans, a physician at Mad River Community Hospital. "What this reminds me of is the days of the city-states in Italy, where physicians had patrons -- I would treat the Medici family but the rest of the people, tough luck."

Officials at St. Joseph Hospital said they have "not been invited" to be part of the discussions on the new hospital and therefore know very little about the effort. But Dr. Kenneth Stiver, vice president of medical affairs of St. Joseph, said he sees it as a threat for the same reason cited above. "If profitable services are carved out there will be even greater financial challenges to [St. Joseph] to remain full-service," he said.

Nonsense, Gibb countered.

"This is an ant on an elephant," he said. St. Joseph, with its parent company, "is a big, huge, strong organization. I'm not very sympathetic to hospitals complaining about someone running them out of business. There is a tremendous amount of money going to hospitals in this country."

A threat to St. Joseph?

Still, the fear that St. Joseph and the other community hospitals may be threatened by the boutique facility has led some doctors to steer clear of the new project. Dr. Thomas Loncar, a general surgeon, was among those approached about it. He read the prospectus, then decided against investing, partly because it would mean spreading himself too thinly. "I couldn't practice exclusively at that hospital, because I deal with patients who need intensive care services and ER services," he said. But there was more. "Philosophically, I was concerned that it will siphon off patients that hospitals can make money off of. That troubled me."

Surgeons first began floating the idea of a new hospital in part because some were unhappy about being forced to provide emergency room coverage as a part of their work at St. Joseph, Loncar said. About six months ago, St. Joseph changed its policy, making the ER coverage voluntary and paying a stipend to those who agree to it.

But dissatisfaction with Eureka's sole remaining hospital extends to other issues. According to a recent article by Dr. Stephen Kamelgarn in the Humboldt-Del Norte County Medical Society Bulletin, much of the medical community has been "extremely dissatisfied" with the direction taken by St. Joseph over the past several years. "Surgeons have been stymied and frustrated by the loss of surgical services. Generalists and medical sub-specialists have been alarmed at poor nursing ratios, loss of morale among hospital staff, [and] sub-contracting out of ancillary services" such as physical therapy, with an attendant loss of availability of those services, he wrote.

Loss of surgical services includes less time available for scheduling elective surgeries -- those that can be done at any time -- physicians said. When St. Joseph bought General Hospital, it closed the latter's three operating rooms; that has resulted in bottlenecks, said Dr. Robert Green, a Eureka plastic surgeon who said he opted out of the new hospital project for lack of investment money. But, he said, "I am in favor of anything that gives the patients of Humboldt County more choice and anything that ups the competition between the hospitals."

Humboldt County Supervisor John Woolley said he caught wind of the plan for a new hospital and hopes to get more information from both its supporters and its critics. He is concerned, he said. "We want to look into it; we want to weigh the consequences, so if there is an impact we can avoid it." Stopping such a hospital from opening, however, will not do away with the reasons it was started in the first place, he said.

Legislators step in

Lawmakers elsewhere have responded to the controversy around boutique hospitals by drafting laws to mitigate their alleged threat. This week, the state Senate's Health and Human Services committee was scheduled to hold a hearing on SB 828, a bill introduced by Sen. Liz Figueroa, D-Fremont, that would restrict the ability of the state Department of Health Services to issue a license to a new hospital near an existing hospital with an emergency room unless the new hospital also has an emergency room and does more than just surgery.

"Before you know it, the average person's not going to have a community hospital around," Figueroa said. "It's very scary. Where are we going to go for emergency services?"

And on Tuesday, U.S. Rep. Pete Stark of Hayward teamed up with Rep. Jerry Kleczka, D-Wisc., to introduce a bill in Congress that would close what Stark's office said was a loophole in two previous medical conflict-of-interest laws, known as "Stark I" and "Stark II." The Stark laws limited the ability of medical providers to refer patients to an entity in which they had a financial interest. But there was an exception: doctors who had part ownership of an entire hospital. Stark's new bill, HR 2490, would close that loophole to fight the proliferation of boutique hospitals -- "a very sick trend," according to the congressman.

Indeed, the biggest roadblock to Eureka's new boutique hospital may come from Sacramento or Washington, D.C. "My big concern is that the government will pull the rug out from under the project," Gibb said. "I think that would be a mistake."

Laws designed to squelch this new direction in medicine only protect the status quo, and what is the value in that? he asked. "Does everyone think the hospital system in this country is working so well that we should all stand up to defend it? Not me. I think it's completely broken.

"That legislation is pure and simple anti-competition legislation that is being pushed by big interests [the major hospitals] who want to protect their turf," Gibb continued. The amount of money he'd make referring a patient to his own facility, when thousands may be using it, is "trivial," he said. The conflict of interest charge "is just a big smoke screen."

Why should patients choose the new hospital over St. Joseph or Mad River? "I'm not sure they should," Gibb said. But it will take Medicare, and, he expects, Medi-Cal; it will be a "beautiful and extremely well-run facility"; and it won't be affiliated with a religious order.

"It's just a choice that they have. I think choice is good."

New hospital's corporate backer

EUREKA'S NEW BOUTIQUE HOSPITAL is being built by local physicians in partnership with a Chicago-based corporation called National Surgical Hospitals (NSH). (www.nschinc.com)

Promising "a better way to deliver surgical care," the company runs 15 other specialty hospitals across the country, including facilities in Walnut Creek, La Jolla and San Diego; Mesa and Phoenix, Ariz., and Logan, Utah, according to its Web site. Most focus on orthopedic, spine and pain management care.

In addition to putting up money for its new hospitals, the company takes responsibility for keeping the facility in compliance with government regulations, cost reporting, billing, collections, employee benefits, computer systems, marketing and other aspects of the business.

Patients are "extremely satisfied with the level of focused care and attention," NSH boasts. On the other hand, "The local hospital is not likely to welcome this new form of competition."




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