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Separation Anxiety

It was an exquisitely uncomfortable moment, and one that would mark a turning point.

Dr. Ted Cooper, a Denver obstetrician, was preparing to be installed that day as chief of the medical staff at Denver's Rose Medical Center. Cooper, who had practiced at Rose nearly twenty years, was well-liked and respected by his colleagues. In many ways, his new position was the culmination of this soft-spoken doctor's long, highly successful medical career.

Then came the phone call from Dr. Jeff Mishell, another longtime physician at Rose and the former vice president of medical affairs at the hospital. Mishell was excited; the news he conveyed dropped like a bombshell. "Ted," he said, in a gravelly voice, "we're going to buy a hospital."

So began one of the stranger chapters in the convoluted history of health-care competition in Denver--and it's not over yet. The action revolves around a group of a hundred doctors, Precedent Health Partners, most of whom, like Mishell and Cooper, had been affiliated with Rose Medical Center for years. Since that moment over a year ago when they decided to buy a hospital, the Precedent doctors have been rattling the local medical scene.

As the doctors' deal has progressed from concept to completion, Rose has been badly shaken. The hospital's once tightly knit medical staff of about 400 active physicians has been split by controversy; professional relationships developed over decades have been seriously strained. Passionate feelings of loyalty and betrayal among doctors, nurses and other Rose staffers have surfaced and collided. Rose's future has even been called into question.

In many ways, Precedent's story is about how physicians are responding to dramatic changes in health care. This is a time of great turbulence and anxiety for doctors; enormous and important shifts are taking place in how physicians are organized, how they are paid for their services and the business relationships in which they participate.

But the significance of Precedent's story doesn't stop there. It also highlights what can happen to a hospital when it changes ownership, as Rose Medical Center did in 1995. It focuses attention on how Columbia/HCA Healthcare Corporation, the giant for-profit hospital chain that bought Rose, has done business in Denver, one of its most important markets in the U.S. And how a group of doctors has told Columbia that it's not the boss and they're not going to take it anymore.

The symbol of the doctors' defiance is Denver's newest hospital, Precedent Health Center, a sixty-bed facility that opened last week at 1650 Fillmore Street.

Although it's small by hospital standards, Precedent is a dramatic challenge to Columbia/HCA's prominence in central Denver. To the east, less than two miles away, sits Columbia's Rose Medical Center, the hospital where most of the Precedent physicians have practiced--until now. To the west, less than a mile away, looms Columbia's Presbyterian-St. Luke's Medical Center, the crown jewel of the for-profit hospital company's local holdings.

When the Precedent doctors first got together in 1996, starting a hospital wasn't part of the plan. Their goal was to gain more clout in the health-care market by combining into a larger organization, as many doctors in California have done. With strength in numbers, the doctors believed they would have more say in negotiations with insurance companies and more control over their medical destinies.

"We felt if we were going to maintain our independence as practitioners, we were going to need to come up with a different way of practicing," says Cooper, now chief of the medical staff at Precedent. "I don't think any of us envisioned from day one owning a hospital."

That changed when a former health-care executive turned real estate agent offered to sell a former Catholic hospital in central Denver to the Precedent doctors--on the cheap. Rick Abrams, now chairman of Precedent's board, remembers going over to the old Mercy Medical Center with Jeff Mishell on a cold, wintry evening in early 1997 to take a look around. The two doctors "sneaked through a side entrance," Abrams says, and were discovered by a security guard who ended up walking them through the dark, dusty, silent rooms. Their first reaction was to dismiss the place as too big and too much of a mess. Then, characteristically, the entrepreneurial Mishell said, "Wait, let's think about this," Abrams recalls.

The more the doctors thought about it, the more opportunities they began to see before them. All along they'd wanted to add extra, lucrative services such as laboratory and radiology to their group venture--to help cushion potential financial losses from managed care and to provide extra income. Under federal laws, individual doctors can't refer patients to such ventures if they have an interest in them, but groups of doctors can. The old Mercy campus would allow the Precedent doctors to centralize a host of extra services in a one-stop-shopping setting, close to many of their existing practices, the doctors realized. And from there, it was only another short step to realizing that Precedent could use the hospital setup for day surgery and short-stay patients as well, giving the doctors still more control.

The doctors wouldn't have considered opening a new hospital if they'd been happy with what was going on at Rose under Columbia/HCA's stewardship, Cooper admits. But because they weren't, they were willing to take the chance.

Now that they're in the hospital business, the Precedent doctors are convinced that they can make significant improvements to the status quo. They claim their hospital will be a new kind of medical institution, more convenient and service-oriented and committed to putting patients' needs first. That's appealing at a time when trust between patients and doctors is seriously strained.

"Unfortunately, we've seen a shift of the emphasis on health care to many places other than the patient," says Abrams. "Concerns about the profitability of hospitals. Concerns about insurance companies and managed care. Concerns about doctors' income. Almost everything but the patient has been discussed and emphasized over the past several years. We at Precedent felt that this was wrong, that we needed to shift the emphasis of health care back to patients. We're going to do things differently."

The central mission of Precedent's medical center--taking care of patients who need to stay in the hospital three days or less--is decidedly different. Most local hospitals, created in an earlier era, don't do a particularly good job of caring for these short-stay patients, who tend to have less complicated illnesses. If the Precedent center can improve service, streamline operations and cut costs, as its leaders promise, it will be introducing a welcome innovation to medical care in Denver.

Still, there are enormous challenges ahead for Precedent--both the medical group and the hospital. By all accounts, existing Denver hospitals already have plenty of room to take on patients needing day surgery or short hospital stays. Beds are sitting empty all over town; all the major medical institutions have invested in outpatient facilities. Precedent may have new ideas and a fresh approach, but the capacity to serve these patients is already there; even without Precedent, there's too much of it.

Meanwhile, the competition makes no bones about its opposition to the new hospital. Columbia/HCA, the most controversial for-profit health-care company in America right now, runs Denver's largest hospital system, five hospitals with a whopping $1.6 billion in revenue last year. If the Precedent hospital succeeds, Columbia/ HCA stands to lose face--as well as a substantial chunk of business. So Columbia/HCA has been trumpeting its objections about Precedent to anyone who will listen.

Even as workmen were putting the finishing touches on Precedent's hospital, accusations were flying thick and fast from both sides. Precedent's detractors argue that even if the doctors' intentions are noble--and they debate even that--the renegade physicians will be forced to give high priority to their very expensive business interests. To meet their financial burdens, these critics claim, the Precedent physicians will have to milk the system for everything it's worth--limiting time spent with patients, for instance, and maximizing income from profitable services such as laboratory workups and diagnostic imaging. They'll grab the most lucrative hospital services and leave losers like intensive care and trauma care to other facilities, critics charge.

Precedent's hundred doctor-shareholders have an enormous amount on the line: They've invested all their professional assets in the group and are the first recourse for lenders in the event the hospital defaults on its $38 million in debt. But they deny that they'll cut services to meet the bottom line.

"Our commitment is to figure out the best way to take care of patients, even if it isn't financially expedient," says Susan Pharo, a pediatrician and Precedent boardmember. "The people in this organization are do-gooders, honorable people. They will do the right thing."

If profit were its primary motive, says board chairman Abrams, the Precedent group wouldn't have donated an entire floor of the hospital rent-free to Hospice of Metro Denver. It wouldn't have given a large amount of space to its airy first-floor child-care center or hired the center's top-notch staff. Precedent wouldn't have invested in state-of-the-art nurse-call and computer information systems, and there wouldn't be extra nurses on the hospital's floors.

But Precedent's leaders don't hesitate to fling accusations of their own. Columbia/HCA, they say, is playing hardball with their group and trying to do everything possible to undermine the new hospital. "They have declared war on us," says Mishell, the group's chief executive. "But we're willing to take the risk, even against a $20 billion health-care giant, that we are doing the right thing and that the public will support us."

Jeff Dorsey, the former Rose chief executive who now heads Columbia/HCA's operations in Colorado, freely admits Columbia/HCA has taken its concerns regarding Precedent to the state's key health insurers as well as to business groups such as the Metro Denver Chamber of Commerce. Precedent is an unnecessary hospital in a city that has far too many empty hospital beds, he argues. "We find it very troubling that at the same time we as a community are trying to take costs out of our health-care system, that others would be adding costs by building excess capacity," Dorsey says.

Dorsey has good reason to be troubled. Precedent's hospital venture is one of the boldest challenges Columbia/HCA has encountered in any of its markets. While doctors in Chicago and Louisiana are trying to buy back hospitals from Columbia/HCA, only in Denver have doctors established a new hospital that will go head-to-head with the corporate giant.

As a result, the eyes of the health-care industry are trained on Precedent, watching to see what happens in Denver. "If we can do it here, doctors can do it anywhere," says Mishell, with barely concealed aggression.

Ralph Pollock, a well-regarded Denver health-care consultant, agrees. "This could be the business model of the future for doctors if it works," he says. "And I would never underestimate the ability of these Precedent doctors to stand together."

The origins of the Precedent doctors' group actually date back to well before Columbia/HCA came to town, to the early 1990s, when managed-care plans such as HMOs were making huge inroads in the Denver market. Up until then, doctors had pretty much called the shots in medicine. That was a golden age for the profession, a period of extraordinary professional autonomy and personal wealth for physicians.

Yet some farsighted doctors were keenly aware that medicine was changing dramatically as businesses across the country began to call for lower health-care costs. The rise of HMOs was a direct outgrowth of these efforts at economizing. In their search for savings, these health plans had two main targets--hospitals and physicians--and they put the squeeze on both.

For doctors who saw the handwriting on the wall--among them, Rose's Abrams and Mishell--the HMOs' growing power was a call to action. As long as doctors remained unorganized, these physicians reasoned, they would be at the mercy of the HMOs. Only by joining together could doctors retain significant control over their futures--and the practice of medicine.

"The idea behind Precedent was a group of physicians from various disciplines coming together in a single organization to manage care and work together more effectively," Abrams says. It's not really a new concept, he notes; the renowned Mayo and Cleveland clinics, among others, have done the same thing for years.

"Physicians feel they have been disenfranchised from the health-care system," Mishell explains. "And they want to feel they have ownership of the system, rather than just being somebody's employee or the tool of an HMO. Not just for financial reasons--but because they see the erosion of their ability to take care of patients in a safe and economic way."

In Denver, the threat was very real. Local HMOs such as FHP (now PacifiCare of Colorado) could--and did--drop doctors from their networks at their discretion, with no explanation given. When this happened, physicians could lose large numbers of patients. Furthermore, HMOs imposed all kinds of annoying requirements on physicians--everything from mandating that only certain drugs be used to setting ground rules for referring patients to medical specialists. Even though doctors controlled about 80 percent of what was spent on health care through their ability to recommend medical services, drugs and technologies, more and more physicians were finding themselves frustrated and overwhelmed by paperwork.

Still, local attempts to organize physicians met with considerable resistance. Getting doctors to agree on anything--much less something as murky as the future direction of the health-care system--is notoriously difficult. On top of this, Denver's medical culture had long reflected the independent spirit of the West; doctors here practiced alone or in small groups, and they didn't much like the thought of giving up their independence.

So it wasn't really surprising when an early attempt to organize doctors at Rose into a group known as Premier drew little support and eventually foundered.

But then Columbia/HCA muscled its way into Denver by purchasing Rose, and everything changed.

Rose Medical Center, named after General Maurice Rose, was founded shortly after World World War II as a place for Jewish doctors to practice on the east side of town. Built and supported with generous donations from wealthy Jewish donors, the hospital attracted top-flight physicians and did well financially. It became known as one of Denver's premier hospitals, distinguished by a collegial culture. Cultivating physicians' loyalty was a top priority.

In practice, that meant that Rose officials were extremely generous. If a doctor really wanted something, he or she usually got it, several physicians and former administrators remember. Need help recruiting a doctor to your practice? Rose was there to help. Want a break on the rent for your office space? Rose was willing to extend it. Want the latest $1 million piece of medical equipment at the hospital? Rose would write the check.

In this, Rose was no different from other hospitals in Denver, and the practice continued through much of the 1980s. That was how business was done in order to keep doctors happy and interested in bringing patients to an institution. Today, however, many of these perks are being questioned by federal officials probing potentially illegal inducements made by hospitals to physicians in exchange for referring patients to their institutions.

At Rose in the early Nineties, though, no one dreamed that one day federal fraud-busters would be poring over hospital records across the country. Pride was the order of the day. Rose doctors considered themselves part of Denver's medical elite and referred to each other with confidence. An affiliation with the nearby University of Colorado Health Sciences Center brought added status.

Alongside a commitment to top-quality care, a spirit of medical entrepreneurialism flourished at Rose. One example was a state-of-the-art computer system designed by Rose doctors that won national acclaim. Seeing that system shelved and replaced by an inferior system was one of the most painful changes Rose doctors faced after Columbia/HCA bought the hospital.

The circumstances of Rose's 1995 sale to Columbia/HCA were problematic from the start. At the time, all the talk was of how Denver's fragmented hospital industry would need to consolidate to cut costs and become more efficient. In that spirit, Rose had been engaged in lengthy discussions with several local hospitals--Lutheran General, St. Joseph, Porter Memorial--about a potential collaboration.

But without warning, Rose pulled out of those discussions in December 1994. A short time later, Rose announced that it had signed a letter of intent to be acquired by Columbia/HCA for more than $150 million. Many physicians wondered how Rose had changed direction so quickly--and critically.

At the time, Rose officials said it didn't appear the hospital had other viable choices. Jeff Dorsey, then Rose's chief executive, warned that independent institutions such as Rose would soon become a thing of the past. Boardmembers agreed that Rose was too vulnerable to survive on its own. Managed care would only intensify, Dorsey and the board argued; it made sense to find a wealthy partner that could protect Rose and ensure its future. That partner, the board decided, was Columbia/HCA.

(Interestingly, the HCA part of the Nashville, Tennessee-based company--standing for Hospital Corporation of America--had been involved with Rose several years before through an agreement that called for it to provide management services to the hospital. And Dorsey was an old HCA hand who kept in touch with his former bosses, including Dr. Thomas Frist Jr., who now runs Columbia/HCA.)

Rose's origins had forged close ties between the institution and Jewish physicians, who supported the hospital for religious as well as professional reasons. For many, Rose was vibrant testament to Denver's Jewish community, a place that inspired deep feelings of loyalty. To placate that community, Dorsey and the board now held out an extremely seductive prospect: The proceeds of the Rose sale would go into a foundation that would help support Jewish causes. The Jewish community would gain, not lose, in the deal, the board said. And many of Rose's Jewish doctors agreed.

Reports of possible conflicts of interest involving current and past Rose boardmembers didn't block the deal. Stung by public criticism, the law firm of Brownstein Hyatt Farber & Strickland, which had close ties to the Rose board, resigned as Columbia/HCA's local counsel. But once the questions over the law firm's role--was it an advocate for Columbia/HCA or Rose?--passed, Brownstein Hyatt quietly resumed its work for Columbia/HCA.

Rose board chairman Stephen Kurtz was deeply embarrassed when it was revealed that he had formed an investment-banking operation and was claiming credit for the Rose deal. Still, Kurtz was able to see the sale to completion, and Rose boardmembers stood by him. They were a tight group, and not about to break ranks publicly over the incident.

What a difference from the way Rose's leadership had conducted itself only five years before, when a different for-profit hospital company, Kentucky's Humana Incorporated, had made a serious run at the hospital.

Back then, Dorsey, with the support of Joel Edelman, the former head of the Rose health system, had argued vigorously that Rose could improve its financial performance. "He was adamant in his belief--and very convincing, by the way--that Rose should be preserved and not sold," says a former Rose executive, referring to Dorsey.

Dorsey's "Go Forward Plan" was a five-year blueprint for how Rose would strengthen its profitability, ensuring its ability to fund its capital needs for equipment and improvements to the hospital's campus. The plan was hugely successful, the former executive reports, making Dorsey something of a local hero and raising Rose's cash flow from just over $7 million in 1990 to almost $25 million in 1995.

It's no wonder that Columbia/HCA was interested in Rose, which would prove a valuable entry point into Denver's booming hospital market. But many Precedent doctors still wonder why Rose was so eager to join forces with Columbia/HCA.

Nothing would change, the board and Columbia/HCA promised Rose's physicians as the sale was consummated. But it didn't take long for doctors to learn how flimsy those assurances were.

Pediatrician Susan Pharo has the no-nonsense air of someone used to dealing with crabby children. Now a member of Precedent, she was on the Rose board of directors at the time of the sale. "Within two board of directors' meetings after Columbia/HCA took over, I resigned," she says. "The input we used to have in how things ran was non-existent. It was obvious we were there to rubber-stamp whatever Columbia/HCA decided. This was a business venture, plain and simple. Somehow we were naive enough not to understand that at the start."

Cooper, now chief of Precedent's medical staff, was also on the Rose board at the time. "Doctors at Rose had always felt the board was very responsive to our input," he says, then sighs. "That changed when Columbia/HCA came in. They were very slow to respond to our growing perception that quality was deteriorating. There were large cutbacks in staff; morale plummeted. There were issues with supplies, with the facilities. But Columbia/HCA spent far more time thinking about who it was going to acquire next than worrying about the problems that were developing at Rose. I know. I was at those meetings."

Jeff Mishell was vice president of medical affairs at Rose at the time, the top administrative position held by a physician. "Under Columbia/ HCA, everything became focused on the bottom line," he says. "Staffing ratios were cut. Nurses did not have enough time to properly care for their patients. There were fewer nurses on the floor. Response time to patient calls increased dramatically. The chief executive at the time was not given the opportunity to plan adequately. The orders were: cut first, re-engineer later."

At the time, Rick Abrams had one of the busiest internal-medicine practices at Rose, based in the old medical office building next door to the hospital. Today Abrams is chairman of Precedent's board, but the disappointment still rings in his voice as he talks about Rose's change in ownership. "Our patients perceived a change in the hospital," he says. "It was as if, in the months and year following the acquisition of the hospital, a floodgate of complaints was opened. For the first time in my twenty years of practice, patients complained bitterly about the care they received at Rose. This was very painful for those of us who had a long history at the hospital and were committed to caring for patients there."

Luana Lamkin, a registered nurse who now oversees Precedent's hospital, was vice president of patient care at Rose when Columbia/HCA arrived; she later became chief operating officer and interim chief executive at Rose. Like others, she describes a period of administrative confusion after the sale, as Rose officials received a stream of management edicts from Columbia/HCA. The company is well-known for micromanaging hospitals and setting demanding financial targets, and the situation was no different at Rose. Officials accustomed to operating independently suddenly found themselves on a very tight leash.

"There was a sense by managers of some impotence," Lamkin says, choosing her words carefully. "A sense that these are the rules, and you don't have any leeway with them." One example: Rose had been told that employee benefits wouldn't change after the sale, but Columbia/HCA reversed its stance. "The 401(k) plan was a mess for a long time," Lamkin remembers. "People wanted to cash out and reinvest their money, and they just couldn't get it out of the plan.

"I had stood up in front of forums of employees and said things wouldn't change," she continues, "and then the next week, I had to change my course. It was embarrassing. It was a mess."

Phil Kalin, the top administrator at Rose, left the hospital within a year of Columbia/HCA taking over, reportedly upset by the changes at Rose. It was just the first in a series of revolving-door management changes.

There were other changes, too. Columbia/ HCA was proud of the large national contracts it had negotiated with suppliers, which yielded significant discounts and helped keep costs low. When Rose came under Columbia/HCA's control, it switched suppliers, changing about "800 products in the course of three months," Lamkin says. While most of the products ordered by Columbia/HCA were acceptable, some generated significant complaints from doctors, several sources say. "It took us a while to figure out we could say, 'No, this is not acceptable,'" Lamkin says, with a touch of regret.

According to Columbia/HCA's calculations, Rose also had too many employees per occupied bed--staffing was 25 percent above company standards. It didn't matter that this staffing level had helped created Rose's hands-on reputation. Hospitals across the country, both those within the Columbia/HCA empire and those outside of it, were cutting staff, and Rose would, too, company managers ordered. In that first year alone, Rose had two rounds of layoffs, cutting 75 jobs and eliminating many more employees through attrition.

"It was to the benefit of the hospital that we learned how to manage it so closely," Lamkin says, giving Columbia/HCA credit for introducing more fiscal discipline than had been common at Rose. "But I think we cut too far."

It was a case of a top-notch hospital coming under the control of a hospital company that ran things by middle-of-the-road standards, Mishell argues. For the smaller, often financially challenged hospitals that Columbia/HCA had bought in its early years, the company's business approach was a distinct improvement. But for Rose, Mishell says, Columbia/HCA's practices were a disappointment. They were also an incentive for Precedent to get off the ground.

No one disputes that the early days of the Columbia/HCA tenure at Rose were hard. But many staffers and physicians have remained loyal to Rose, and they say it's time for critics to stop spilling sour grapes and move on.

Jeff Levy, head of radiology at Rose and chief of the medical staff, feels passionately about this, as do many others. While the Precedent doctors' criticisms of Rose sting, he says, many of their complaints are dated and no longer true.

"Right now things at Rose are excellent," Levy says. "This place is feeling much more positive than it has for the past two years. The administration is really dedicated and in tune with what the important issues are for the medical staff. The door is always open. Our traditions have continued. Quality has continued. Fundamentally, things haven't changed."

Levy acknowledges that it took some time for doctors and administrators at Rose to speak up to Columbia/HCA. "We didn't know what we could do," he says. "We didn't know when we could say, 'That's not acceptable.' We had a lot of learning to do. But we're through that now."

Levy has several examples that illustrate his point. When Columbia/HCA wanted to change the mammography films at Rose, radiologists tried the new products but didn't like them. "We told them we wanted to keep what we were using," he says. "We got exactly what we wanted."

When Columbia/HCA brought in new naso-gastro tubes, the same thing happened. "The tubes should have a marker on them so they show up during X-rays," Levy explains. "Their tubes didn't, so we let them know and got rid of them."

Today Levy is working on a significant reorganization of Rose's medical staff that will make it "more effective and more of a leader," he says, adding that the hospital's administration has been "very emphatic that they need and want guidance from physicians at all levels." Under the new regime at Columbia/HCA that came in last summer, he notes, there's far more local control at Rose.

That regime was brought in as part of a national housecleaning. Last year Columbia/HCA chief executive Rick Scott was ousted in the midst of an escalating federal fraud investigation launched by the Department of Justice, the FBI, the agency that runs Medicare and others. The investigation spans many states, including Colorado, and centers on alleged billing irregularities by Columbia/HCA and questions about financial arrangements with physicians as well as member home-health agencies.

Since then, the company has been run by Thomas Frist Jr., formerly chief of Hospital Corporation of America, who has vowed to change Columbia/HCA's controversial, combative style of doing business. (The fraud investigation, however, is continuing.)

Jeff Dorsey was caught up in the changes. He left the Colorado system for a brief time last year but was recruited back after Columbia/ HCA's upper management changed. A charismatic executive and hard-nosed businessman who inspires confidence but also a certain degree of wariness in associates, Dorsey has provided important continuity during the company's changeover.

Rose was where Dorsey got his start in Denver's hospital market, and it remains an important priority, he says in an interview. A communications executive is sitting nearby taking notes; outside the entrance to the Columbia/ HCA headquarters, the company's logo has been taken off the wall and lies on its side by the door. "The dissatisfaction that some of the physicians have voiced I have taken seriously and still do," Dorsey says, speaking emphatically. "And wherever we have found that we are not performing up to expectations, which at Rose are very high, we seek to correct that."

Columbia is recruiting more than thirty new physicians to join the hospital, he notes, and plans to invest nearly $10 million in capital improvements in Rose this year. "Business is better than ever," he says. "We're delivering more babies than ever. I don't believe personally, nor do I believe the community does, that Rose Medical Center has deteriorated."

Dorsey draws a distinction between Precedent the medical group and Precedent the hospital. "I always believed, and I still do, that the group is an interesting concept," he says. "We were totally supportive of it; we believed it would be a strong ally [for Rose]. But as far as I'm concerned, Precedent the hospital is nothing more than a desire to create a revenue stream for the medical group, to bring in more money.

"Sadly, I think it has fractured the [Rose] medical staff horribly," Dorsey continues. "It is viewed by physicians at Rose as a serious threat, not just to the hospital but to them. It's a fifty-year-old hospital with great history and long-term relationships, and those are being broken apart."

Reassuring Rose's doctors and staff that all is well is a crucial part of Columbia/HCA's current strategy. Last week the hospital giant engaged in some brilliant public relations by announcing it would give Rose to its Columbia HealthOne joint venture in Denver. Rose is the only Colorado hospital wholly owned by Columbia/HCA; the other four hospitals in the Columbia HealthOne venture are owned fifty-fifty by Columbia/HCA and the nonprofit HealthOne Foundation. With the change, the nonprofit HealthOne organization will now technically own half of Rose.

Although in practice little will change--Rose has been managed by the Columbia HealthOne venture since it was formed--local health-care experts agree that for Rose doctors and others worried about Columbia/HCA's commitment to the hospital, the shift in ownership status is an important symbolic gesture. That's because it gives the nonprofit foundation a formal vote in any decisions regarding Rose's future, conveying the impression that Rose is returning, at least in part, to its community roots. (In reality, the joint venture always had a vote in any decision that would change Rose's status, a lawyer close to Columbia/HCA reports, so the change is more cosmetic than anything else.)

Although their feelings about Rose are complicated, even deeply conflicted, most of the Precedent doctors are still on the medical staff at Rose, have their offices there and care for patients there. Many still want to treat hospital patients at Rose when it's not appropriate to treat them at the Precedent hospital.

"We still love being at Rose, and it would be my preference to use it as my primary hospital," says Pharo, noting that Precedent's medical center will not take care of complicated pediatrics cases.

She and other Precedent doctors say that it's not at all uncommon for physicians to serve on many different medical staffs, including those of competing hospitals. Traditionally, that hasn't gotten in the way of maintaining collegial professional relationships. Precedent's hospital and Rose can co-exist, they argue, as competitors with a different style of care and a different focus, and with doctors practicing at both institutions.

Still, many Rose physicians remain bitter about their once and future colleagues. Some, like Alan Schreiber, an internist who's been at Rose for eighteen years and who rejected an offer to join the Precedent group, feel the Precedent doctors are being disloyal to an institution that supported them for years.

"I don't have any reason to leave Rose," Schreiber says, with emotion. "I came here from New York City in 1980 and knew nobody. The people here were extremely nice to me, very helpful, and I have a tremendous sense of loyalty to the hospital. I think some of the physicians in Precedent have forgotten where their roots are."

Just as distressing, Schreiber says, is the change in patient referrals that has taken place since Precedent was formed in late 1996. Traditionally, doctors at Rose referred patients freely to each other, without many constraints. But Precedent doctors now have a financial incentive to refer to each other, and not to doctors outside the group, Schreiber and others charge. That's because the Precedent doctors' financial interests are pooled, a common structure for such large medical groups.

As a result, doctors like Schreiber have seen patient referrals from Precedent doctors dry up. "Colleagues who have been referring to me for fifteen years just stopped," Schreiber says. "I mean, that is very painful. When business conflicts get in the way, when people who I have been loyal to and who have been loyal to me turn away, the passions run really high. Although we have no trouble eating lunch with each other and being friendly in the halls, deep down there's a competition" that didn't exist previously.

Danny Eicher, part of a large and very successful obstetrics and gynecology group that didn't join Precedent, sounds exasperated, in a good-natured way, as he makes a similar point. "When doctors that used to refer to me because I'm a good doctor stop, that is hard," he says. "I haven't changed except that I'm fatter, older and balder. If the referrals change, it's not because of me--it's for a financial reason. Is that really in the interest of the patient? I wonder."

But like Schreiber, Eicher is no fan of Columbia/HCA, either. "Columbia/HCA buying Rose hurt me more than what the Precedent doctors are doing," he says. "I hated the hospital going from not-for-profit to for-profit. Patients shouldn't be a commodity. Clearly, that was the impetus for Precedent to split away. But all that being said, I don't think the quality of care here has deteriorated. Ten years ago there were extras, things that made this the place to be, like a rose on your tray. Today they're gone. But the nursing staff is still outstanding, the care is excellent. I wouldn't be bringing patients here if I felt any differently."

As executive vice president and chief operating officer of PacifiCare of Colorado, Colorado's No. 2 health insurer, part of Val Dean's job is monitoring the quality of care at hospitals with which the plan does business. PacifiCare has watched Rose Medical Center closely since it was purchased by Columbia/HCA, Dean says, and it has noted no sign of deterioration in quality at the hospital. Rose has participated in PacifiCare's hospital network for many years, and the HMO has no plans to change the arrangement, he adds.

But there's a rub, Dean explains in early April, in a lengthy interview that gives a rare glimpse into the HMO's decision-making processes: Many of the Rose physicians who have worked with PacifiCare over the years have joined Precedent and are planning to see large numbers of their patients at Precedent's new medical center.

That puts PacifiCare, as well as other health plans in Colorado, in a bind. Does the HMO sign up with the new Precedent hospital, when it already has all the hospitals it needs in central Denver? If so, what are the implications for health-care costs in this area? If not, what are the implications for patients and their well-established relationships with Precedent physicians?

"Where do hospitals make most of their profits today? Mostly on their outpatient services--not on inpatient care," Dean notes, answering his own question. "If Precedent comes in and takes away a big piece of that outpatient business, will it eat into revenues of the existing hospitals, force them to raise prices and increase costs for everybody? Or will the new competition lower prices for outpatient care, making that segment of the market more efficient? The jury is still out."

Columbia/HCA officials have made their feelings known to PacifiCare, as well as to other health plans: They don't want the insurers to sign on with Precedent's center. "They've made the effort to talk to us and express their concerns and desires," Dean admits. "And their desire is clearly that we don't contract with Precedent."

As presented to Dean, here's Columbia/HCA's argument: If plans such as PacifiCare encourage the proliferation of new facilities such as Precedent, health-care costs will go up. Traditionally, that's the way things have gone in health care: The more hospitals and other health centers there are, the more expensive technology they buy and services they add, the more costs rise for businesses and consumers who pay health-care bills.

But does it have to work that way? Or can new competition actually bring down health-care costs? For Dean, the question is absolutely critical. PacifiCare will not sign contracts that will inflate prices for hospital services in Denver, he says. The HMO's duty is to be a responsible steward of its business clients' resources, Dean says with determination, and that means not spending more when it's possible to spend less without compromising care.

Yet a few minutes later, a slight frown comes over his face. What about the patients? PacifiCare has no desire to force its members to see other physicians, Dean insists. Yet if the HMO doesn't include Precedent in its network, its members may have to see other doctors. And the Precedent doctors do have a lot of patients.

The week before the Precedent hospital opened, PacifiCare made its decision. The HMO decided not to sign a hospital contract with Precedent; it will, however, maintain contracts with Precedent doctors. Eric Sipf, PacifiCare's chief executive, says the HMO was concerned that Precedent's center had not yet received accreditation from Medicare or the Joint Commission on Accreditation of Healthcare Organizations, and it was not entirely comfortable with the arrangements Precedent was making to transfer more seriously ill patients to other acute-care facilities. All such transfers involve risks, he notes, and it's easier to deal with hospitals that have a full range of intensive-care services on site.

Just as important, Sipf adds, was PacifiCare's conclusion that it has no need for additional hospital beds in central Denver, however comfortable and well-situated they may be. "I'm not sure how a new hospital can open and not increase health-care costs for everyone, employers and consumers alike," Sipf explains. "We just don't see a compelling reason to expand our hospital network."

Like the medical community, insurers are split over Precedent. Blue Cross and Blue Shield of Colorado says it's willing to contract with the new medical center; Cigna HealthCare of Colorado, which is closely aligned with the Columbia/HCA Denver hospital network, has decided against signing up with Precedent. And that could hurt the fledgling hospital.

Whatever doctors and hospitals feel about what's going on in health care today, the insurers still call the shots in Denver. That's because they have the contracts with employers and consumers and the power to decide which institutions they will pay for seeing patients. Unless patients with certain HMOs revolt and demand to use Precedent's new hospital, that's the way it's going to be.

This business about insurance contracts and Columbia/HCA's vocal opposition to Precedent infuriates Mishell. Precedent's chief executive claims Columbia/HCA's pressuring of insurance plans not to contract with Precedent's hospital is anti-competitive. "What they're doing is very unethical and borders on illegality," Mishell says.

Other Denver health-care experts say that bare-knuckled competition such as the kind that reigns in Denver means hospital systems will do whatever they can to secure contracts and lock out their competitors. It's all part of doing business, and it's all perfectly legal.

Mishell and Dorsey once were friends and close associates; now their animosity is the stuff of legend. According to several knowledgeable sources, a breach-of-contract lawsuit brought by Mishell against Dorsey and Rose helped destroy their relationship; the suit was settled quietly, and details were never reported. "I can't comment," Mishell says when asked about it.

For his part, Dorsey gets hot under the collar when accused of undermining Precedent. Mishell worked on forming the doctors' group while he was still at Rose, with Dorsey's full knowledge and approval, Dorsey says. And for a while, Mishell was paid by Columbia/HCA to do so, Dorsey notes.

If only the Precedent group hadn't gone out and bought its own hospital, everything would be different, Dorsey says. But that step took things too far--after all, Columbia/HCA has two hospitals in central Denver, and it takes competitive threats very seriously, he adds.

Precedent knew there would be trouble when it decided to buy the old Mercy hospital and found a powerful protector. Centura Health, Columbia/HCA's No. 1 competitor in Denver, became a guarantor of Precedent's debt and is also helping out with insurance contracts. For Centura, which operates the former St. Anthony hospital system in Denver as well as the former Advocate hospital system, teaming up with Precedent was a way to stick it to Columbia/HCA while securing a position in central Denver.

Centura used to run the old Mercy hospital that now houses Precedent's medical center, but the company shut it down three years ago because business was weak and doctors were referring patients elsewhere. Now, however, Centura is clearly hoping that Precedent will succeed in drawing those patients back again--from Columbia/HCA's nearby hospitals--and send them to Centura facilities when they need more advanced care.

"We're working with health plans to help Precedent be included in our system-wide contracts," says Terry White, Centura's executive vice president in charge of Denver operations. "We have some financial risk with Precedent, and we are in a business relationship with them. We have an interest in seeing that they are successful."

That interest could translate into a new phase in the ongoing fight for the Denver health-care market between Columbia/HCA and Centura, with Precedent right in the middle. As the battle shakes out and both hospital systems try to secure a major presence in all the key parts of the metro area, even more new health-care facilities probably will be built in Denver. That way, if insurers start negotiating exclusive contracts with one system or another, both Columbia/ HCA and Centura will have their bases covered.

Patients could come out the winners in this high-stakes game. "If the competition revolves around price--and it may very well--businesses and consumers could get very nice discounts from all this," says Tom Rockers, a former Denver hospital executive and now head of The Alliance, an outfit providing insurance products to employers. "And it could be good for the community in the long run."

And the Precedent doctors will have proved an important point along the way. "Columbia/HCA may have bought the bricks and mortar that were Rose," says Abrams. "But they didn't buy the doctors that were there. We have our own ideas about what's right for patients and what's right for medicine. And we'll do it our way."

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