'Berlin Wall' may crumble in Cox deal with Columbia docs

by Paul Flemming

SBJ Staff

Cutting a deal with 10 owner-doctors of Columbia Hospitals in Springfield was a key to approval of Cox Health Systems' July 14 announcement that it would acquire its smaller competitor.

Among the provisions of the deal is the opportunity for doctors who are not Cox employees to gain entry to the managed care systems of Cox, and an option to buy Columbia Hospital North at 2828 N. National and make it operational for inpatients again.

"I hope it's the Berlin Wall coming down," said Dr. William Campbell, president of the general partnership of 10 doctors and a physician with a family practice in Nixa.

"It is something that is in flux, both in Springfield and around the country," said Larry Wallis, president and chief executive officer of Cox Health System, referring to inflexible requirements of hospital association for managed care participation by physicians. "This is all pretty new, and my prediction is that it will grow."

The doctors owned about a 10 percent equity stake in the local operation, along with Nashville-based Columbia/HCA. The doctors had 50 percent of the vote on the board of governors that approved the sale to Cox, with Columbia/HCA holding the other 50 percent. Campbell said the doctors had a contract agreement with Wallis months ago as a predicate to Cox's entering serious negotiations with Columbia.

Campbell said the agreement included the option to buy the north facility at a price certain, an infusion of a venture capital loan from Cox to renovate the building to meet licensing requirements, Cox's pledge to run the hospital's emergency room for two years, and inclusion in Primrose Health Care Services, Cox's managed care system, for doctors whether as Cox employees, Cox medical staff, or independent physicians.

"It was the jugular issue," Campbell said.

Wallis said Cox's commitment to assured membership in Primrose is limited to the 10 owner-doctors, though they, too, will be subject to the organization's credential requirements. Other doctors may apply for Primrose membership and must be credentialed, as well as meet the specialty requirements of the managed-care system.

"If the system has 10 neurosurgeons, and that seems the right number to serve the contracts it has, we won't be going out to look for 20," Wallis said.

Heretofore, managed care patients, with rare exceptions, have had only Cox and St. John's staff doctors to choose from, depending on the contracts of their respective managed care companies.

Wallis said Cox has had physicians who are not on the medical staff who have had membership in Primrose, depending on specialty and the geographic needs of the managed care system.

"There's been a kind of boundary there, somewhat artificial," said Robert Glazier, president-elect of Cox's board of directors, of the near exclusion of independent physicians from managed care. "I think (the Cox administration) has found a way to do it so doctors don't lose their individuality."

Columbia/HCA was unable to establish a foothold with managed care contracts here, and Cox and Columbia officials agreed it was a major reason the national company was unable to grow beyond its 7 percent market share in Springfield.

"Columbia was never really a significant factor, in my opinion," said Dr. Donald Menchetti, a Cox physician and board member.

"The managed care market here is very tight," said Michelle Fischer, CEO of Columbia here. "It was very tough to get our feet in here."

The possible new incarnation of Columbia North may change that, Campbell said. He said he thinks Cox will reap public-sentiment benefits of offering managed care patients doctor choice.

Cox CEO Larry Wallis said at the official announcement of the acquisition that the doctor group had about a three-month option on buying the north facility. Cox is acquiring all of Columbia's assets Ð real estate, buildings, equipment included Ð in town. The price was not disclosed.

Campbell said he, an engineer a contractor and the group's legal counsel were to meet July 17 to discuss renovation of the north hospital. The week of July 20, Campbell said, he expects the general partners to meet and decide on action. He said proceeds of the sale of the doctors' equity stake in Columbia, less taxes, should be enough to purchase the hospital.

More than five of the 10 partners are in favor of exercising the option and proceeding with the venture, Campbell said. If all 10 do not want to take part, he said those who are already committed will be able to proceed on their own. Other physicians interested in an equity investment in the hospital or participation in its practice are actively being sought, he said.

Those independent doctors who earlier raised concerns about the rumored acquisition were not privy to the owner-doctors' deal.

Campbell said a strict confidentiality agreement kept the group from letting other doctors know options would remain for independent doctors following the Cox purchase.

From the buyer's perspective, Cox officials and members of its board said the decision to acquire Columbia was a simple one: Cox needs the capacity to handle increased demand for acute care. Wallis said the acquisition was cheaper than building new.

In addition, board members and Columbia officials said, state approval through the Certificate of Need process is not required with an acquisition as it would be with building new facilities, a regulatory action that can take up to a year for approval if a need for new facilities is proven.

"Vibrant operations continue to grow," said Cox board Vice Chair Charles H. Chalender. He said the cost efficiencies of the acquisition will help Cox maintain its mission of providing quality health care at the lowest possible prices. "The decision's always difficult when you're spending that kind of money. Nevertheless, it's considerably less than the cost of building," Chalender said.

The acquisition, more than seven months in the negotiating, is set to close Aug. 1. Wallis said that among the next two weeks' most pressing issues will be bringing Columbia computer systems online with Cox's. A two- to three-month period of assessment will follow, headed by Chief Operating Officer Bob Bezanson, Wallis said.

Columbia's

Owner Docs:

Arthur J. Cohn

James Godard

Dennis Morrison

William Campbell

Dennis Robinson

Paul Vick

Lewis McKay

Manuel Camejo

Steve Cherry

Floyd Simpson

PHOTO CAPTION:

Dr. William Campbell is president of a group of physicians with an option to buy the Columbia North Hospital and an agreement with Cox to get the facility operational and gain managed care participation for its doctors.

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