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Last summer a Denver emissary for Columbia Hospital Corporation, the nation's largest for-profit health-care chain, had lunch with one of the city's prominent community leaders. A pair of hospitals were on the menu.
Leaning over the table during the meal, Richard Anderson, chairman of the local Columbia/HealthONE joint venture, reportedly made a threat that would change Denver health care forever. "He said, 'I want you to know--if they don't sell, we'll crush both Lutheran and Children's,'" says Charlie Steinbrueck, chairman of the board at Children's Hospital, Denver's premiere pediatric facility.
Steinbrueck says Anderson's comments were relayed to him by the community leader, whom he declines to identify. Anderson insists he never made the remark. "I've never made any threat against Children's or Lutheran," he says. "I've worked very hard for the last three years to do a deal with them."
Regardless of what was said over lunch, Steinbrueck's contention that Tennessee-based Columbia is out to get Children's and Lutheran Medical Center is widely accepted as true in the local hospital community. It's an indication of just how bitter the fight for Denver's health-care dollars has become.
The board at the nonprofit Children's ultimately decided not to sell to Columbia, which already has gobbled up a third of the hospitals and medical facilities in Denver. What it got in return was a crash course in corporate realpolitik. Following the rebuff from Children's, Columbia decided to expand its pediatrics facility at Presbyterian/St. Luke's, which it swallowed up in 1995. According to Steinbrueck, Columbia is now threatening the unique role Children's plays as a regional center for pediatric medicine.
The cutthroat struggle for the pediatric market is just one example of how health care has changed in Colorado. From the corridors of the legislature to hospital boardrooms across the state, old assumptions have been turned upside down by the new drive for profits in health care. Hospitals once known for candy-striped volunteers and society fundraisers find themselves in the middle of battles for dominance. Powerful new charitable foundations have been formed to control the millions of dollars in pay-as-you-go penance extracted from nonprofits who've switched to for-profit status. And in the Colorado statehouse, a recent showdown between Columbia and its nonprofit rivals provided a blunt demonstration of the power of money.
Last month the House health, education, welfare and institutions committee killed a bill that would have regulated the sale of nonprofit hospitals such as Children's to for-profit companies like Columbia. The law, sponsored by Republican Bill Kaufman of Loveland, would have required that all such sales be reviewed by the Colorado attorney general to be sure the nonprofit's assets are fairly valued. It also would have allowed the AG to oversee the transfer of funds from those sales into charitable foundations--a process that up to now has taken place behind closed doors. The idea was that since these hospitals were built up over the decades with indirect public subsidies--they paid few, if any, taxes--they should give something back to the public before earning millions for their new owners.
The law was also prompted by a series of scandals that have rocked the health-care world. Across the country, nonprofit hospital boards have agreed to sell community institutions at fire-sale prices. Later it's been discovered that some of the nonprofits' boardmembers and executives have arranged multi-million-dollar bonuses for themselves and high-paying jobs with the for-profit suitors.
In Colorado, Kaufman's bill had the support of state attorney general Gale Norton, state insurance commissioner Jack Ehnes, Catholic Charities, the American Association of Retired Persons, Jewish Family Services, and dozens of other community groups. Steinbrueck from Children's also testified on behalf of the legislation. But it was opposed by Columbia--and that made all the difference.
Columbia "played hardball" to defeat the bill, says Representative Kaufman. The company hired Frank "Pancho" Hays, the most powerful lobbyist at the Colorado legislature. It also called on the services of its local counsel, the Denver law firm of Brownstein Hyatt Farber & Strickland, which has earned a reputation for its ability to touch the hearts and minds of public officials. And Columbia has the cash to deliver its message in a way every politician understands: Its Colorado political action committee raised more than $100,000 last year and helped fund the campaigns of several local politicians, including U.S. Representative Dan Schaefer and unsuccessful U.S. Senate candidate (and Brownstein partner) Tom Strickland.
Columbia's deep pockets extend far beyond the statehouse. In recent years the company has acquired or taken over nonprofit hospitals that have served Denverites for generations. The company's cherry-picking campaign went into high gear in 1995 with the $180 million purchase of Rose Medical Center, long an institution in the Jewish community. An agreement to take over the management (and collect the lion's share of profits) at Presbyterian/St. Luke's, Swedish Medical Center and Aurora Presbyterian came just a few weeks after the Rose deal closed. By then, Columbia already owned Aurora Regional Medical Center and North Suburban Medical Center.
With its Denver base firmly in place, Columbia is now shooting for a statewide presence. The company recently tried to buy city-owned Memorial Hospital in Colorado Springs but was rebuffed. Now it plans to open a competing facility in the Springs and makes no secret of its desire to obtain Parkview Episcopal Hospital in Pueblo. "We are interested in developing a statewide network," says Jeffrey Dorsey, president of Columbia's Colorado division. "The insurance companies are looking at organizations like ours to contract with across the entire state."