CAPE HOSPITALS OPPOSE THE PLAN

Both Cape Girardeau hospitals will oppose an application by a group of physicians to build a new free-standing ambulatory surgery center in the city.

James Wente, administrator of Southeast Missouri Hospital, and James Sexton, president and chief executive officer of St. Francis Medical Center, say their boards of directors have voted to oppose the certificate of need application filed to build the Mississippi Valley Surgery Center, a $5.6 million facility featuring six operating rooms for outpatient surgery.

The new facility just isn't needed, say Sexton and Wente.

The state health department will review the application Sept. 14.

The proposed surgery center's service area has more operating rooms than it needs through existing free-standing surgery centers and the region's hospitals, say Wente and Sexton.

At least 19 Cape Girardeau doctors were investing in the surgery center.

The doctors, headed up by Dr. William Kapp III, an orthopedic surgeon, say the new facility will make Cape Girardeau competitive with larger health care markets, including St. Louis and Memphis.

The group also argues that such centers can offer outpatient surgeries at lower costs than full-service hospitals can. Further, another surgery center will give consumers more choices.

Kapp and his partners say the hospitals won't take steps to compete with larger markets, but Wente and Sexton say the doctors are trying to match apples and oranges in comparing surgery centers to full-service hospitals.

"It is undisputed that ambulatory surgery centers have a less comprehensive cost structure than Joint Commission-accredited, full-service hospitals," Wente says. "We don't dispute that. We realize that health care is more of an issue and cost is more of an issue."

Controlling health-care costs in the regional market is the "fundamental reason" the two hospitals are in merger discussions, Wente says, and eliminating duplication of costly medical services will cut hospital costs.

"I'm not sure that another surgery center is going to be the solution to lower costs," he says.

Wente also pointed out that both hospitals are not-for-profit organizations.

Southeast, which operates on an annual budget of about $150 million, will take in about $6 million more in revenue than it will spend, he says.

That excess revenue -- Sexton projects excess revenue of about $8 million at St. Francis -- has to be reinvested in the facility for new programs, equipment, capital improvements and new community health initiatives, Wente says.

"Six million dollars sounds like a lot if you win the lottery, but on a $150 million business, it's not that much," he says. "Keep it in perspective."

Surgery centers, on the other hand, are for-profit ventures, and revenue earned over expenditures goes to the investors.

Mississippi Valley investors project profits of $2.7 million to nearly $4.1 million in the center's first three years.

Kapp has said he and his partners will work to offer indigent care in the community.

Wente and Sexton say both hospitals have taken several steps to be more competitive, including working with orthopedists to cut costs on total joint replacement surgeries and other procedures and more aggressively contracting with managed care companies for discounted medical services.

Wente says the state's Buyers Guides publications show both local hospitals are competitive with St. Louis hospitals.

And when the hospitals offer discounted services, he added, they are taking the discounts off of charges that are already lower, in many cases, than charges in St. Louis.

And if the hospitals' merger is approved, Sexton says, improved efficiencies will make the new entity even more efficient.

Wente and Sexton dispute several statements in the Mississippi Valley application for a certificate of need and in the partners' rationale for building the surgery center.

Sexton says the partners will be "picking the low-hanging fruit" by luring low-cost, high-profit procedures away from the hospitals and into their center.

"If they want to do this for the community, then they should do everything for the community," he says, including taking over "non-profitable" services like emergency room and trauma treatment.

In 1997, St. Francis performed 6,739 surgeries; Southeast 7,071. Slightly more than half of the procedures at each hospital were outpatient procedures.

Mississippi Valley's certificate of need application projects 6,032 surgeries will be performed at the center next year.

Kapp and his partners say the new center will help bring patients back into the market from St. Louis.

Wente questions that figure.

"If they're saying they're only taking the cases that are going to St. Louis, then they're saying there's 500 cases a month leaving Cape Girardeau," he says.

Mississippi Valley's application also shows a shortage of 6.6 operating rooms within its projected service area of 176,020 people -- Cape Girardeau County and its neighboring Missouri counties.

That's not true, Sexton says, because the partners didn't include the 39 hospital-based operating rooms in the region.

With those included, Sexton says, there is actually a surplus of operating rooms in the surgery center's projected service area.

St. Francis has 12 operating rooms, and Southeast 14.

"Clearly, there's a lot of operating rooms here," Wente says.

In addition to reviewing the number of operating rooms available, Wente and Sexton say, the state will also consider how often those rooms are used.

Wente and Sexton say there isn't enough volume of surgeries being performed in the region to justify the extra rooms.

A hospital operating room has to be used for at least 500 procedures a year for the state to consider adding it, Wente says. For a surgery center, the minimum annual use required is 750 procedures.

St. Francis' volume is 589 procedures per operating room. Southeast's stands at 505.

And while Kapp and his partners say they can't book operating room time, Wente and Sexton say their facilities' operating rooms are booked about 75 percent of the time available -- but that doesn't mean the surgeons, including Kapp and his partners, are using all of their allotted time.

Kapp and his partners say their surgery center won't mean the hospital will lose outpatient surgery business.

"Bull," says Sexton. "They can't generate those numbers without taking them out of the hospitals. They can't do it."

Slightly more than half -- 52 percent -- of the surgeries performed at St. Francis are outpatient procedures, Sexton says, and a good half of the outpatient surgeries are performed by the surgeons investing in the Mississippi Valley center.

Sexton also doubts surgeons at Mississippi Valley will steer surgeries toward the hospitals.

"They're investors" in the surgery center, he says.

The hospital administrators also say they aren't sure Mississippi Valley is just a surgery center. The equipment list on the certificate of need application includes an MRI -- four are already in place in Cape Girardeau -- as well as areas for physical therapy and work-hardening.

"It's not my prerogative to judge, but I think there's an awful lot more here than meets the eye," Sexton says.

Kapp and his partners say they offered both hospitals a chance to invest in the new surgery center, and Kapp wonders why, if the hospitals are so keen on competition, they aren't interested in an opportunity to become involved in offering lower-cost surgical services.

But Wente and Sexton say that while their proposed merger is under scrutiny, neither hospital can risk adding anything to its balance sheets.

Sexton says all of the financial documentation for each hospital is "in place" and ready for review by the Federal Trade Commission and Department of Justice.

And he wonders if Kapp and his partners realize the hospitals can't participate in opening a surgery center right now.

Wente says the investors wouldn't honor his request that they hold off on their application for the surgery center until the merger process was complete.

If the certificate of need for the Mississippi Valley Surgery Center is denied, the partners say, the investors will just add operating rooms onto their individual offices.

"It's not really in our community's interests to have every office have operating rooms. That's not efficient," says Dr. August Ritter III, an orthopedic surgeon and Mississippi Valley partner.

Both sides say there is nothing personal in their dispute.

Wente says the hospitals are blessed with "outstanding" medical staffs.

And Kapp and Ritter say they and their partners have no complaints regarding facilities, equipment or services at either St. Francis or Southeast.

"It's not a beef with the hospitals. It's a beef with not being able to be competitive," Ritter says.