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Investor-Owned Hospital in North Carolina

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Investor-Owned Hospital in North Carolina TH E INVESTOR-OWNED HOSPITAL MOVEMEN T IN NORTH CAROLINA N.C. Colter f®irPtlbflc I'ulky Research Board of Directors The North Carolina Center for Public Policy Research is an independent research and educational institu- Chairman tion formed to study state government policies and practices Thad L. Beyle without partisan bias or political intent. Its purpose is to enrich the dialogue between private citizens and public Vice Chair officials, and its constituency is the people of this state. The Keith Crisco Center's broad institutional goal is the stimulation of greater interest in public affairs and a better understanding of the Secretary profound impact state government has each day on everyone Karen E. Gottovi in North Carolina. A nonprofit, nonpartisan organization, the Center Treasurer was formed in 1977 by a diverse group of private citizens V. B. (Hawk) Johnson "for the purpose of gathering, analyzing and disseminating information concerning North Carolina's institutions of gov- Thomas L. Barringer ernment." It is guided by a self-electing Board of Directors Daniel T. Blue, Jr. and has individual and corporate members across the state. Maureen Clark Center projects include the issuance of special reports Frances Cummings on major policy questions; the publication of a quarterly Francine Delany magazine called North Carolina Insight; the production of a Walter DeVries symposium or seminar each year; and the regular parti- Charles Z. Flack, Jr. cipation of members of the staff and the Board in public Joel L. Fleishman affairs programs around the state. An attempt is made in the Virginia Ann Foxx various projects undertaken by the Center to synthesize the Robert Gordon integrity of scholarly research with the readability of good R. Darrell Hancock journalism. Each Center publication represents an effort to William G. Hancock, Jr. amplify conflicting views on the subject under study and to Mary Hopper reach conclusions based on a sound rationalization of these Sandra L. Johnson competing ideas. Whenever possible, Center publications Betty Ann Knudsen advance recommendations for changes in governmental poli- Helen H. Laughery cies and practices that would seem, based on our research, to Thelma Lennon hold promise for the improvement of government service to Duane Mattheis the people of North Carolina. Dershie McDevitt Isaac Miller Roy Parker, Jr. Executive Director Center Staff Betty Chafin Rash Ran Coble Jack Betts Grace Rohrer Jim Bryan Jerry Shinn Elizabeth Fentress Interns McNeill Smith Bill Finger Asa Spaulding, Jr. LeeEgerton Robert Gregory Marianne Kersey Robert W. Spearman Lacy Maddox Mary Pinchbeck Teets Robby Hassell Carol Majors Frances Walker Bobbie Redding Nancy Rose Cameron West Cherise Sloan Betty H. Wiser TH E INVESTO R-OWNED HOSPITAL MOVEMENT IN NORTH CAROLINA Edited by Elizabeth M. "Lacy" Maddox A Report by The North Carolina Center for Public Policy Research THE INVESTOR-OWNED HOSPITAL MOVEMENT IN NORTH CAROLINA © Copyright 1986 by the North Carolina Center for Public Policy Research, Inc., Post Office Box 430, Raleigh, North Carolina 27602, (919) 832-2839. All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the North Carolina Center for Public Policy Research. Inquiries should be addressed to Executive Director, N.C. Center for Public Policy Research, Post Office Box 430, Raleigh, N.C. 27602. Production by PUBLICATIONS UNLIMITED, Raleigh, North Carolina North Carolina Center for Public Policy Research CONTENTS Pa e Acknowledgements iv About the Authors v Executive Summary vii Introduction 1 Julie McCullough and William Haflett Glossary of Health Care Terms 3 Julie McCullough, William Haflett, and Blue Cross and Blue Shield of North Carolina Part I Chapter I - The National Investor-Owned Trend- A Description and Why It Can Be Good or Bad 9 Julie McCullough, William Haflett, and Ran Coble Chapter U - North Carolina Hospitals 17 William Haflett Part II Chapter III - Factors Affecting Changeover to Investor Ownership 37 Julie McCullough and William Haflett - Crisis in Public Hospitals - Capital Formation and Bond Issues Chapter IV - Competition: Other Actors on the Health Care Stage 47 Robert Conn - Introduction 47 - Focus on Ambulatory Surgery Facilities 55 - Health Maintenance Organizations Arrive in North Carolina 71 - Urgent Care Centers: Doc-In-A-Box Medicine 84 - Diagnosis Related Groups and Changes in Physician Practice 89 Part III Chapter V - North Carolina's Investor-Owned and Managed Hospitals 103 William Haflett Chapter VI - Investor-Owned Hospital Management Companies in North Carolina 111 Julie McCullough and Robin Woods Chapter VII - Further Research by the North Carolina Center for Public Policy Research 155 Appendices Appendix A - Brief Histories of Investor-Owned Hospitals in North Carolina 158 Appendix B - Profiles of Investor-Owned Hospitals in North Carolina 163 Appendix C - List of Diagnosis Related Groups 229 Bibliography 241 Other Suggested Resources 243 Index 247 The Investor-Owned Hospital Movement in North Carolina ACKNOWLIGE After three years of preparing this publication, it many of them have responded with helpful corrections will be impossible to thank all of those who have and suggestions for improvement. The Center thanks contributed to the research efforts. However, there are these people for their assistance. A few people read several organizations and individuals to whom the the report very carefully and responded with detailed Center would like to give sincere words of ap- and carefully considered comments. The Center preciation. wishes to give special thanks to these persons - This report was made possible by two Sandra Greene, George Karahalis, Ellen Kendall, grants: one from the Kate B. Reynolds Health Care Barbara Kramer, Arnold Nunnery, Pete Roye, and Trust of Winston-Salem, North Carolina and the Glenn Wilson. other from the Henry J. Kaiser Family Foundation of Center interns have provided many hours of Menlo Park, California. The N.C. Center extends its research and interviewing efforts to this study. The sincere thanks for this generous support. efforts of two former interns, Julie McCullough and Staff members and interns of the N.C. William Haflett, evolved into principal authorship of Center have talked with representatives of all of the this report. Another intern, Robin Woods, also hospitals in North Carolina that are owned by, leased contributed significantly to the writing and research. to, or managed by an investor-owned corporation - Additionally, several Center interns have added to the either in a personal interview or over the telephone. body of research over the last two years: Mary Fant, Center representatives have talked with employees of William Fleming, Susan Golonka, Alison Gray, the investor-owned corporations in regional and home William Judge, Sandra Martin, Marvin Overby, and offices all across the country. The Center has also Keith Springle. talked with many public and not-for-profit hospital Center staff members Jim Bryan and Ran representatives as well . Almost without exception, Coble worked long hours in developing the research hospital and corporate representatives have welcomed design and in conducting interviews across the state. the Center and provided information that has been Nancy Rose, Wyounda Haynes, and Marianne Kersey crucial to this research. Without this assistance, the have providedgreat assistance in producingthe Center's efforts would require much more time and manuscript. Jack Betts served as copy editor and expense, and the research results would be much less provided valuable help in fine tuning the manuscript. complete. Carol Majors' talents and hard work as production Special thanks go to Paul Buescher of the coordinator have produced an attractive andeasy-to-use Division of Health Services for responding quickly to report. requests for basic information from hospital licensure Two volunteers have provided valuable applications filed with the Department of Human assistance, as well. Maria Long has spent several Resources. hours as a typist and as a proof reader. Rodney Several experts on health care in North Maddox spentmany eveningsand weekendsproof Carolina gave the N.C. Center invaluable assistance reading and photocopying. The Center gratefully by serving as reviewers of this report. Some 40 acknowledges their contributions. individuals received copies of the review draft and 0 iv North Carolina Center for Public Policy Research ABOUT THE AUTHORS Julie McCullough is a health policy Ran Coble is executive director of the researcher in Washington, D.C. After earning a B.S. N.C. Center for Public Policy Research. His expe- in Business Administration, she received her Masters rience prior to coming to the N.C. Center in 1981 in Regional Planning from the University of North included serving as an attorney in the office of the Carolina at Chapel Hill in 1983. While working Secretary of Human Resources and as a research toward the Masters Degree, Ms. McCullough served analyst with the Fiscal Research Division of the N.C. as an intern with the N.C. Center on the investor- General Assembly. A graduate of Davidson College, owned hospital study. She is currently working as a he earned a Masters in Public Policy Sciences from market research analyst for the medical services and Duke University and a J.D. from UNC-CH Law blood program of the American National Red Cross. School. Mr. Coble became a member of the North Carolina State Bar in 1977. William Haflett is a student at the University of North Carolina at Chapel Hill working toward a joint degree in law (J.D.) and business Robin Woods is currently a law student at (M.B.A.). Prior to entering this graduate degree the University of North Carolina at Chapel Hill and program, Mr. Haflett worked for seven years with the will receive her J.D. in 1986. Her undergraduate U.S. General Accounting Office in Washington, D.C. degree in Public Policy Sciences is from Duke He has worked during the last two summers as a law University.
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