Making Their Case
Hearing starts on surgery center
Stating that 44 percent of patients in Cullman County go to other cities for outpatient surgery, Woodland Medical Center CEO John Heider told a judge Monday that a free-standing ambulatory surgery center is greatly needed here.
Baby boomers are aging, their numbers projected to increase the Medicare population by 78 percent over the next 25 years, he said. The rate at which people 65 and older utilize medical services may be two or three times greater than it is today, boggling the health care system with a high demand for surgeries.
Woodland and Cullman Regional Medical Center (CRMC) are slugging it out through legal channels to determine which of them should build such a center in Cullman. Woodland, in concert with HealthSouth and a group of local doctors, wants to locate an outpatient surgery center at the corner of Eva Road and Alabama Highway 157. CRMC plans to incorporate the concept in an ambulatory care facility on the CRMC campus. Both hospitals have applied for a Certificate of Need (CON) from the State Health Planning and Development Agency (SHPDA), and each has opposed the application of the other.
Administrative law judge Michael Cole opened hearings Monday morning in which each side is trying to prove it is best suited for the job. Woodland began presentation of its case Monday, bringing in Heider and three other witnesses to support its position.
Dennis Nabors, attorney for HealthSouth and the proposed HealthSouth/Woodland Surgery Center, said ambulatory surgery is an “emerging model important to health care in the 21st century, maybe more important than ever because of the spiraling costs of health care and the aging of the baby boomer population. We’ve got to have models of health care that are more effective and efficient than they are now.” He said the acute health care center in a hospital setting is best at dealing with emergency and trauma, but “when you mix inpatient and outpatient surgery, the really sick people take precedence.”
Nabors said there was a free-standing ambulatory surgery center in Cullman in the ’80s, built by a group of surgeons. CRMC purchased it and shut it down, he said, noting that factor “may be the most important reason for giving HealthSouth/Woodland the ambulatory care center.”
Referring to HealthSouth’s current financial problems, Heider said Woodland’s parent company, Community Health Systems (CHS), will finance the center, “even if nobody else does.” He told the court CHS has an annual $100 million cash flow. Woodland and HealthSouth expect to invest $1.125 million each in the facility, then sell 49 units to physicians, who would then own 49 percent of the corporation. HealthSouth and Woodland would each own 25.5 percent.
Building a surgery center would have the short-term effect of decreasing outpatient surgeries performed at both Woodland and CRMC, he said, but capturing the market for surgeries performed in other cities and attracting new patients to Cullman would increase the numbers of surgeries done locally over time. He said Woodland does 80 percent of its surgeries on an outpatient basis; CRMC, 70 percent.
Pointing out differences between the two hospitals’ plans, Heider said the HealthSouth/Woodland center was projected to cost $7.2 million; CRMC’s center, $23 million. Woodland’s center would be a true free-standing facility; CRMC’s would be attached to the hospital as part of a larger facility.
In cross-examining Heider, CRMC’s attorney Ryan de Graffenreid quizzed the CEO extensively on details of the HealthSouth/Woodland application. He reviewed particulars of HealthSouth’s recent financial downturn, including being de-listed from the New York Stock Exchange, its misstatement of revenues totaling billions of dollars, and guilty pleas of key executives to charges of fraud and falsification of financial statements. He asked Heider if the financial status of HealthSouth concerned him, since the corporation’s annual report was included in the application.
“This is a HealthSouth application through and through,” said CRMC attorney David Hunt. “None of the other entities are mentioned. This is a HealthSouth project. This flow chart they’ve put up here to try to insulate themselves from HealthSouth is just a fantasy.”
Heider said HealthSouth’s financial situation did not bother him, because Woodland or local doctors “could fund this project with or without the funding of HealthSouth.” If HealthSouth declares bankruptcy, CHS would guarantee the debt as a general partner, he said.
De Graffenreid asked why Woodland chose to locate its ambulatory surgery center “next door to CRMC” rather than on its own campus. Heider said land not currently in use there was earmarked for office buildings for physicians. He said the Highway 157 site was chosen by doctors and HealthSouth before Woodland got involved with the project. Land on Woodland’s campus has also become much more expensive since a Wal-Mart Supercenter was built across the street, he said.
Nabors pointed out that the ambulatory care center purchased by CRMC in the ’80s was closer to Woodland than the proposed Woodland facility is to CRMC.
Asked why Woodland did not team with CRMC on the project, Heider said CRMC had approached him about a joint surgery center but wanted to retain 51 percent of the ownership.
To charges the project was designed to “take patients away from CRMC,” Heider said, “I have been on record since Day 1 that we are not trying to put (CRMC President) Jay Weatherly out of business. This center is to stop the out-migration of surgeries to other cities.”
The hearings are scheduled to continue at 9 a.m. today at the Cullman Electric Cooperative, with HealthSouth/Woodland presenting further evidence in its case.
Group of doctors side with WMC
Cullman Regional Medical Center’s (CRMC) efforts to incorporate ambulatory surgery into its services and prevent Woodland Medical Center from doing the same thing is “a very expensive way the hospital is trying to control health care in this community,” Dr. Greg Windham said in a hearing Monday morning. “Competition is good; I don’t care of you’re selling milk or Kool-Aid or health care.”
Windham was testifying before a judge assigned to hear contested cases on CRMC’s and Woodland’s rival proposals to build an ambulatory surgery center in Cullman. He said he and a group of doctors “out of frustration with the system” filed an application to build the center, and CRMC “found out and filed one.” The CRMC center would “do everything for everybody,” and “all of a sudden, they decided they wanted to be in the outpatient surgery business.” Having an on-campus center would be outpatient surgery, “but much more inconvenient and costly,” he said.
He said he had been an owner of Cullman’s first ambulatory surgery center in the ’80s, one of the first in the state. After two years, the physicians sold 40 percent of the facility to CRMC, with the understanding the hospital would maintain it. CRMC made the case that it needed the center in order to get a bond issue passed. He didn’t believe the argument but got outvoted, he said. CRMC then closed down the outpatient surgery center and opened WorkFirst and an urgent care facility in its location. Surgery costs escalated, once outpatient surgery was returned to an inpatient setting, and surgeons were again competing for operating rooms, he said.
“The only reason they bought it away from us was to close it and incorporate it back into the hospital, so they can charge more for it,” he said. “Now all of a sudden, it’s ‘We want to do it.’ Well, why did you close it? I don’t think they (CRMC) know how to run it. HealthSouth, despite their financial problems and cooking the books, are the No. 1 management company in the world. They know how to do it.”
Windham, who has been a surgeon in Cullman for 21 years, said more than a dozen local physicians have signed on to open an ambulatory surgery center in conjunction with Woodland and Health South.
“This project would allow CRMC to focus more on their primary market – acute care. It would allow them to cut staffing and the things they scream about losing money on and focus on the things they do well. If they would not try to be all things to all people, they would be well-served, the people would be well-served, health care dollars would be better spent, and they would avoid duplication of services.
“I fought for it (outpatient surgery center) years ago, and I’m going to fight for it again,” said Windham, calling himself the town’s oldest surgeon. “I don’t plan to practice until I’m 105, but this community needs health care dollars to be well spent. Do I trust them (CRMC) to do it right this time? No, I don’t. Do they have any surgeon with them on this project? No, they don’t. If they’re the only dog in town, we’ll have to keep hunting with them, but that dog’s not doing very well right now.”
He estimated the center would see about 5,000 cases a year, or about 20 percent of every surgeon’s practice. The doctors have formed a corporation, Cullman Outpatient Surgery, that “is poised to enter into this agreement with HealthSouth and Woodland” after the Certificate of Need process is completed. He said Woodland plans to build its facility on 10 acres of land he purchased in the 90s “as a defensive move” when CRMC was insisting that doctors locate inside the POB. He said he paid $30,000 an acre, plus $85,000 an acre for improvements, but will sell the property at the appraised price of $354,000.
Windham said local doctors William Smith, Jeffrey Manord, John Evans, Joan Iacobelli, Kevin Johnson, Steven Fuller, Gregory Mick, Sheldon Black, Peyton Colvin, Vince Bergquist, Don Hirsbrunner, Ben Gomez, David Dueland, Donald Marecle and Charles Lovelady had put in $1,000 each to join the corporation. Windham expressed surprise when CRMC attorney Ryan de Graffenreid told him that Dueland, Gomez and Lovelady had also invested in CRMC’s ambulatory surgery center.
Dr. Kevin Johnson, anaesthesiologist at Woodland, also testified on behalf of the hospital’s application. He said he often sees patients who have gone out-of-town for outpatient procedures that can be performed more inexpensively in an ambulatory surgery center than a hospital.
Johnson said the turnaround time – the time between the end of one surgery and the beginning of another – is much shorter in an ambulatory surgery center than in a hospital operating room because personnel are cross-trained in the former.
“Everyone has been trained to do a lot of different jobs,” he said. “You’ll see nurses who are capable of not only taking care of patients, but of mopping floors.”
Also in a hospital acute care environment, outpatient surgeries can be delayed when surgeons or physicians are called on to deal with emergency situations such as C-sections or car wrecks.
“Patients these days like walking in and walking out,” Johnson said. “There is no way they are going to get that in a hospital setting. They are always going to be at the mercy of whatever is happening in the hospital.”
HealthSouth physical therapist Lydia Haynes was also called to testify on behalf of HealthSouth/Woodland but was dismissed until CRMC’s case comes before the court.
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