HOSPITAL ADMINISTRATORS DESCRIBE BENEFITS OF AFFILIATION

Cape Girardeau's hospitals want to serve as the hub of regional health care, not a spoke, administrators said Wednesday.

If the hospitals can establish a single health-care system by affiliation, "we can create one strong, consolidated and integrated delivery system here in our region," said Jim Wente.

Wente, administrator of Southeast Missouri Hospital, and James Sexton, president and chief executive officer of St. Francis Medical Center, spoke to the Cape Girardeau Lions Club Wednesday at the Holiday Inn about the proposed affiliation between the two hospitals.

As managed care continues to gain a foothold in the region and more hospitals consolidate with large groups like Tenet and BJC, hospitals must know who the competition is to compete successfully, Sexton and Wente said.

An affiliation would allow the two hospitals to "create a full continuum of care that will enable us to compete in a very good, strong, positive way in the new health-care competition we're seeing today," Wente said.

Competition for health-care dollars isn't just in Cape Girardeau or Southeast Missouri, they said. It's also in St. Louis, Memphis and Southern Illinois.

The BJC system is active in the St. Louis area and Illinois; Southern Illinois Health Systems owns several hospitals, nursing homes and other health-care facilities in the region; Tenet is in the process of trying to merge Doctors and Lucy Lee hospitals in Poplar Bluff; and the SSM (Sisters of St. Mary) system based in St. Louis has designated Southern Illinois part of its market region, Sexton said.

"That's four systems that are rummaging around in our service area that we need to be cognizant of," he said.

Wente said Southeast Missouri Hospital's primary service area in Southeast Missouri and Southern Illinois includes 200,000 people. But the potential market is more than 500,000 people throughout the region.

"Competition is not just in 63701," Sexton said, referring to Cape Girardeau's ZIP code. "It's a bigger market than Cape Girardeau."

In addition, Sexton said, Cape Girardeau is seeing a proliferation of free-standing, outpatient service facilities popping up that also constitute competition for the two hospitals.

An affiliation would help the Cape Girardeau hospitals remain strong, locally controlled entities in the health-care market and help ensure that specialized medical services are still available locally, he said.

Competition at the regional level is "something that we can't take for granted," Sexton said.

In pushing for the affiliation, "our desire is to create a regional medical system," he said.

"It's our desire to be a hub of that system, and not a spoke for somebody else," Sexton said.

Neither would comment on who the spokes in the system might be if affiliation occurs.

The hospitals announced in December that they are studying the feasibility of a permanent affiliation. A Joint Study Committee, a body made up of representatives from both hospitals' boards and administrations, is reviewing a draft of an efficiency study that projects approximately $47 million in savings over a five-year period if the two hospitals affiliate. No details have been released on how those savings might be achieved.

Wente and Sexton said the study, carried out by Arthur Andersen and Co., would not be made public and would be shared only with hospital officials on a "need-to-know" basis.

If the affiliation doesn't go through, Sexton said, the two hospitals "can continue to beat each others' brains out for the next couple of years," but each might have to partner with another health-care system as managed care contracts and decreasing reimbursement for Medicare services continue to cut into profits.

"(Wente) joins up with one, we join up with another, and there's a new phenomenon," Sexton said. "Headquarters is somewhere besides Cape Girardeau."

If either hospital joins a large health-care system, decisions will be made by out-of-town corporations, and the profits will go out of town as well, Sexton said. But an affiliation would allow St. Francis and Southeast to "put those resources together and put together a system that will be centered in Cape Girardeau that will be able to position itself for market share and be able to grow in the future," he said.

Neither would comment on which systems they might consider teaming up with.

Several concerns have been raised in the community about what changes an affiliation might bring about in health-care services, such as increased costs because of lack of competition.

"You can't have it both ways in our town," Wente said. "You either want the two hospitals to work together, to cooperate, or you just can't gripe whenever you see two medical office buildings, two helicopters, two hospitals."

If the affiliation doesn't go through, Wente said, and an out-of-town system takes over one of the local hospitals, there is the possibility that specialized tertiary services such as cardiology or neurosurgery "would be moved out of our local community into those flagship hospitals" in St. Louis or Memphis.

Local health-care prices are now competitive in many categories with hospital charges in the St. Louis area, Wente said.

"We will take our sticker price and lay it next to any St. Louis systems, and it will be very competitive, probably less than theirs 50 percent of the time," he said. "If we're higher than St. Louis it won't be by a material amount."

Hospitals discount services in order to win managed care contracts, Wente said. He did not disclose what type of discount Southeast offers, but he did say the hospital is "very aggressive with the pricing of our managed care contracts."

Wente said he and Sexton "fully expect" federal anti-trust agencies -- the Federal Trade Commission or Department of Justice -- to investigate the proposed affiliation. The FTC has been notified of the hospitals' desire to affiliate, Wente said, and he is concerned "only to the extent that it could extend the timetable of trying to complete the transaction."