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Green Clinic's CEO, Robert Goodwill, says Lincoln just screwed up. Its board declined an offer to invest in the specialty hospital, he says, and the hospital's losses stem from a "spending binge" Stone began in his attempt to compete. "Patients are choosing us because we're vastly superior," Goodwill says. But hospital bosses say this choice isn't a real one. "You're not going to disagree with the guy who's going to be cuttin' on you," says John Goodnow, CEO of Benefis Healthcare, a hospital system in Great Falls, Mont., that tried unsuccessfully to shut down a specialty hospital opened by half the city's doctors. "You can say patients have choice. Yes, theoretically. But c'mon, who's going to go against their own physician?"
Hospitals are fighting back in none-too-subtle ways. Some won't let an ASC physician-investor admit patients in their wards. And powerful health systems often use their leverage to lock physician-owned competitors out of preferred networks of insurers. Via Christi owns Kansas' largest managed-care plan; Wesley has an exclusive contract in Wichita with the state's leading insurer, Blue Cross and Blue Shield. "It's brutal competition," says David Laird, CEO of the Heart Hospital of Austin, which competes with the Texas nonprofit Seton Medical Center. "They act like they have a halo over their heads."
Such competition is fueling the arms race. Via Christi is counterattacking with a new neuromedicine service line. The weapons: a 64-slice CT scanner; and a brand-new $3.5 million CyberKnife, an X-ray gun that zaps tumors with pinpoint precision, housed in its own $1.5 million building. It has set up a stroke-treatment center and brain-aneurysm lab. "This is one of the areas that we've beefed up since all the specialty stuff happened," says Larry Schumacher, CEO of Via Christi's Wichita operations. "We're trying very hard to protect that." Wesley, for its part, has remodeled its operating rooms, opened a $54 million, four-story critical-care building and invested in its own gadgetry. "We compete on technology and have to stay state of the art," says Francie Ekengren, chief medical officer.
And if they build it, we'll fill it. The Medicare Payment Advisory Commission found that health-care markets with specialty hospitals have roughly 6% more cardiac surgeries and 9% more bypasses than markets without them. It's not that doctors deliberately push unnecessary surgery, but when a choice of treatments exists, capacity and monetary incentives have been known to influence the choices physicians make.