Regulators scrutinize Cox-Columbia plans

by Paul Flemming

SBJ Staff

Government regulators are reviewing Cox Health Systems' proposed acquisition of Columbia Hospitals in Springfield. Local independent physicians are opposing the purchase with a letter-writing campaign.

Both the Federal Trade Commission and the state's attorney general's office are reviewing the deal under provisions of federal antitrust law.

"We are reviewing this proposed acquisition at this time," said Scott Holste, a spokesman for the Missouri attorney general. "The review would entail looking at an acquisition to see if it would be anticompetitive. There's a wide variety of information

that is gathered from the parties involved and third parties."

The FTC, through a spokesman in Washington, D.C., would neither confirm nor deny an ongoing review, as is the federal agency's policy. Tom Watkins, chair of the Missouri Bar Association's health and hospital law committee, said he had discussed the proposed acquisition with an attorney working on the case and that the case is being reviewed by the FTC. (See the related story below.)

Administrators, board members and owners of Columbia and Cox would not discuss the deal.

"My interest in this is in fair trade practices; allowing the consumer, which is primarily business, to have choices and to continue to have one small institution responding to the market more than those other two have been," said Dr. Charles Mauldin, a private practice physician and president of the board of Physician's Choice, a group of about 100 independent doctors in southwest Missouri. Mauldin said he was speaking for himself and not on behalf of the group.

Mauldin said there has been a roughly four-year process of Cox and St. John's buying physicians' practices and making them employees of the hospitals. "They intend to control the health care industry in Springfield. Cox and St. John's have shown that," Mauldin said. "To get rid of a small player like Columbia pretty much sews it up.This small element still exists that allows the practice of medicine to take place outside of its own walls and allow market forces to work any way it sees fit."

"Columbia South has always been independent-physician friendly, going out of their way to make membership attractive, as opposed to an employee relationship," said Dr. Gil Mobley, owner of Dr. Gil's Immediate Care and Occupational Health Center. "From an independent physician's standpoint, I see it as a threat to provide cost-effective services to our client companies. Columbia South has negotiated cut rates to our client companies. Cox and St. John's won't do that."

"Since Columbia never came forward with a big presence here like they did in other communities, there never evolved a third network with enough support (and range of services) to attract (insurance carriers) given the nature of the exclusivity wanted by the two major networks," said Gordon Kinne, CEO of Humana in Springfield.

Physician's Choice's board met May 20 to consider its position on the proposed acquisition. "The physicians that are at Columbia are going to have a hard time integrating into the Cox system. Cox would appear to have them over a barrel. They have to accept whatever terms Cox offers, or leave," Mauldin said.

Cox Health Systems is a not-for-profit organization that operates three hospitals two in Springfield 52 physician clinics, insurance companies and other services, as of July 31, 1997. Cox reported $469.1 million in gross patient-care revenue from Aug. 1, 1996, through July 31, 1997.

Columbia Hospitals in Springfield are owned by Louisville-based Columbia/HCA Healthcare Corp. and Missouri Healthcare System LP, according to tax records on file with the Greene County Assessor. Columbia bought the operation, which has two hospitals in Springfield, in 1995. Local officials would not release information on revenue for the local operations.

Columbia announced May 20 it will sell for $1.2 billion 22 hospitals to a variety of not-for-profit hospitals, which did not include the Cox deal in Springfield. The company has said it will reduce the number of hospitals it owns from 330 to about 200.

"Columbia is this largest hospital company in the country, but it's running this tiny little community hospital that's not like that," said Dr. William Reynolds, a plastic surgeon. "The most profitable ones will be kept, the least profitable ones are sold off. This hospital is profitable."

State officials received notice of the proposal March 27, Holste said.

"Columbia did contact us early on about the purchase of their property here, but we could not come to terms on price," said Mike Peters, spokesman for St. John's Health System. Peters said St. John's had not been contacted by state regulators about the acquisition and would have no comment on the proposal.

Mobley said other investor groups expressed interest in buying Columbia. He said he would prefer that a for-profit group, which would continue to allow independent physicians to continue to practice at Columbia, buy the hospital. He has written a letter to the FTC expressing his opposition to the sale to Cox.

"When it's all said and done, there will be several hundred letters to the FTC" written by physicians, Mobley said.

Cox's two Springfield hospitals now have about 44 percent of the local health care market, based on October 1996 through September 1997 patient discharge statistics compiled by the Hospital Industry Data Institute, an arm of the Missouri Hospital Association. Columbia, by that measurement, commands 7.3 percent of the market; St. John's Regional Health Center controls 48.7 percent of the market.

For Greene County patients only, Cox has 46.4 percent, St. John's 44.5 percent and Columbia 9.1 percent of discharges for patients who live in the county.

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