Church-sponsored hospitals were serving the elderly and poor in the United States over 100 years before Medicare and Medicaid even existed. Now U.S. healthcare is a $3.0 trillion per year industry. There are few nun administrators anymore, and we’ve seen some pretty aggressive business behavior. Here are a few examples.
- Leveraging public perception: The managed care negotiator for a children’s hospital tells a commercial insurance plan’s negotiator that if they don’t give the children’s hospital everything they want, the children’s hospital will take out a full page ad in the city newspaper with a picture of a toddler wearing an adult size gown. The ad will call out the insurer’s refusal to acknowledge the difference between pediatric medicine and all other types of medicine. The insurer yields.
- Diluting specialists: A community hospital alleges that on-call coverage for pain management is not reliable, so it recruits two independent pain management specialists to the community. The community, which only had one pain management physician, now has three. This effectively carves the existing patient population into thirds.
- Rejecting a competitor’s health plan: Two competing not-for-profit health systems each operate their own respective health insurance plan. One system tells all the independent physicians on its hospital medical staff that its facilities will no longer be in-network with its competitor’s health plan one year in the future. The physicians are verbally discouraged from accepting the competitor’s insurance plan.
- Preventing expansion: One community hospital buys the land adjacent to the competing physician-owned surgical hospital that is being constructed. This prevents the physician-owned hospital from adding office space or imaging services unless it forms a joint venture with its competitor in the future.
- Refusing hospital privileges: A hospital board refuses to accept the medical staff’s recommendation to renew a physician’s privileges to practice medicine in the facility on the basis of some business decision. There is no professional medical reason. The physician attempts to litigate, but is ultimately forced to move to another community.
- Targeting competitors’ patients: Providers bid to purchase the search engine advertisements that appear when patients search for their competitors. So if a patient in St. Louis web searches for John Anderson, DO, orthopedic surgeon, then an advertisement would appear above the search results for Rodney Smith, MD –The Top Ortho Surgeon in St. Louis.
- Drag-along rights: A for-profit ASC management company takes over a struggling ASC and negotiates a 40% ownership stake for itself, as well as a new operating agreement. Less than three years later, the ASC management company exercises its “drag along” right to compel the physicians to collectively sell 20% of their ownership in the business when the ASC management company finds a buyer of its own 40% ownership stake. The overall 60% sale demands a controlling interest valuation premium.