Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, February 12, 1992 TAG: 9202120326
SECTION: VIRGINIA PAGE: B-1 EDITION: METRO
SOURCE: By CHARLES HITE MEDICAL WRITER
DATELINE: LENGTH: Long
CARILION SAYS HOSPITAL-MERGER CRITICISM UNFAIR
Carilion officials had to go to court to defend the merger of Roanoke Memorial and Community hospitals. This week, a magazine covering medical news concluded that Carilion's victory was a loss for patients.What's the result of the merger of Roanoke Memorial and Community hospitals?
The two affiliates of the Carilion Health System and their lone competitor in the Roanoke Valley - Lewis-Gale Hospital - appear to have "the power to do just about anything they want."
That's the conclusion of an article this week in Modern Healthcare, a weekly magazine covering medical and health news.
The article also suggests the merger has increased prices, costs and construction.
Those conclusions are "totally without substance and without documentation," said Carilion President Thomas Robertson.
The merger, Robertson said, has accomplished exactly what Roanoke Memorial and Community claimed: Construction and operating costs are lower, services have been offered that otherwise would have been too costly for either hospital to do alone, and prices have not gone up as much as they would have.
What most irks Robertson are the article's assertions that the merger hasn't lived up to its claim to hold down costs and prices.
At one point the article states that the hospitals "spent more money on construction and capital equipment than they had suggested would be necessary before the merger." Later, it suggests the hospitals promised the merger "would solve everyone's problems without any major expenses."
"We never said we were going to reduce health-care costs," Robertson said. "We said we were going to contain health-care costs."
The merger of the two Roanoke hospitals became a national story in May 1988 when the Justice Department filed suit to stop it. Justice Department attorneys claimed it was anti-competitive and would allow the combined hospitals to dominate the Roanoke market and arbitrarily raise prices.
During a lengthy trial, Carilion introduced expert testimony that $20 million to $25 million in construction costs could be avoided if the merger was allowed. The expert said Roanoke Memorial would need to spend $76 million to replace outdated facilities, some dating back to the 1920s.
Robertson says Carilion has met that projection: A new nine-story pavilion due to be completed by the end of 1993 is expected to cost $55 million.
As part of the merger, women and children's services are to be consolidated at Community. Three new floors are being added at a cost of $3.5 million. At the trial, Robertson says, Carilion officials estimated they would spend between $1 million and $4.5 million to consolidate women and children's services. They also said that without the merger, Community would spend nearly $7 million on projects in order to compete with Roanoke Memorial.
The article notes that prices have increased at all three hospitals since the merger. Last year, the average charge per adjusted admission rose 12.9 percent at Lewis-Gale, 9 percent at Roanoke Memorial and 6.8 percent at Community. The article notes the average charges at Roanoke Memorial ($8,854) and Lewis-Gale ($8,271) are much higher than the state average of $6,325.
But the article fails to note, Robertson says, that patients admitted to Roanoke Memorial are much sicker than at most community hospitals. Roanoke Memorial offers a variety of high-tech, expensive services not available at many hospitals and that drives up prices, he said. When charges are adjusted for the severity of patient illness, Lewis-Gale becomes the most expensive hospital in the area, he noted.
"Our pricing increase has nothing to do with the merger," says Lewis-Gale President Karl Miller. He attributed the increases to increased medical costs and to the addition of new services such as open-heart surgery.
Miller charges that the driving force behind Roanoke Memorial's price increase is Carilion's sale of $145 million in revenue bonds last year. Prices have to go up to pay the debt on the bonds, he says.
But Robertson counters that less than half of the bond issue is due to new construction; the rest was simply refinancing old debt. He adds that bonds would have been sold without the merger in order to replace outdated facilities.
After reviewing construction projects and new services at Roanoke Memorial and Community in the 18 months since they merged, the article then turns its attention to Lewis-Gale.
The Salem hospital "hasn't been sitting idly by, watching Carilion expand," the article says. It notes that Lewis-Gale "began an open-heart surgery program, opened a surgical intensive care unit, opened two operating room suites and expanded its inpatient oncology services."
Miller says those projects had nothing to do with the merger - they had been on the drawing boards since 1987. And there was no expansion of oncology services, just a renovation of the floor where those services were offered, he said.
Apparently the magazine's editors "fed all construction projects into a computer" and concluded the merger was the reason behind them, Miller said. "That's not the case."
Robertson had similar complaints.
A pediatric cardiologist mentioned in the article was added before the merger took place; an electrophysiologist is not employed by the hospitals but by a private group of doctors; a mobile sleep lab to serve outlying areas was added because there was no need to have two hospital-based labs; the expansion of the emergency room mentioned in the article has not happened; administrative services were relocated to a remodeled warehouse, but the consolidation allowed the hospitals to stop paying rent for six separate facilities; a new office building at Community was on the drawing boards before the merger was even discussed.
The benefits of the merger will occur over a five-year period and costs will level out over that period, Robertson says. Because the merger has been in effect only 18 months, it's difficult to evaluate results, he says.