When the Med-West venture was coined two years ago, the premise was an easy sell. Together the hospitals would be stronger than going it alone.

Both Harris and Haywood hospitals had witnessed a troubling loss of patients to Mission — a loss so troubling in fact neither hospital could afford to continue as it was. They faced a cold, hard reality: turn the course, and fast, or they would be faced with financial insolvency.

Indeed, both hospitals hoped the MedWest joint venture would shore up the erosion of patients to Mission. Both, however, seemed to have different ideas of how that would play out on the ground.

Was there enough business for both to stay the size they were, or would one ultimately evolve into the big kid on the block under the MedWest umbrella — and if so, who?

Before the merger, and even now, Haywood and Harris competed very little. Fewer than 5 percent of patients from Jackson migrated to neighboring Haywood or vice-versa.

But with the future of their medical community on the line, 1 percent here and there suddenly seemed to matter quite a lot.

While the call by some Jackson doctors to withdraw from MedWest seems like a shot across the bow to their neighbors in Haywood, Jackson doctors said they didn’t intend it that way. They aren’t questioning the quality or caliber of health care at Haywood’s hospital or by Haywood doctors. Instead, it seems desperation amidst a shifting health care landscape has seized the day.

Next week: Read more about the specific concerns raised by Jackson doctors, an analysis of hospital market share, a snap shot of finances, and philosophical view points on the MedWest venture.

Four long-time physicians in Jackson County are leaving C.J. Harris hospital after becoming disenchanted with the direction of MedWest — and even more so with Carolinas HealthCare System, a giant network of 34 hospitals that MedWest is affiliated with.

Dr. Bob Adams, a hospitalist who is leaving Harris after 36 years, fears Carolinas plans to build up Haywood as a flagship to compete with Mission. He didn’t like where that would lead.

“Harris devolves and Haywood grows,” Adams postulated. “They are playing the corporate practice of medicine. I don’t want to be a pawn in somebody else’s power struggle and be used as a widget in a big business’ plan for their benefit.”

The president of Harris, Steve Heatherly, laments the loss of the four doctors — and the circumstances.

“It is unusual in the history of this organization to have physicians leave because they were not satisfied with the strategic direction,” Heatherly said.

Making matters worse, another seven doctors in the Jackson-Swain medical community have either already left or plan to leave — for a total loss of 11.

“It is unusual to have that level of turn over,” Heatherly said, even though only four of the 11 actually chalk up their departure to “dissatisfaction with the hospital.”

Lessening the blow somewhat, seven new doctors are moving to Jackson and Swain in coming months. They had already been recruited and were intended to bolster the physician ranks.

Now, however, the hospital will see a net loss instead of gain and a gap in a few key specialties.

Dozens of doctors, of course, aren’t going anywhere.

“We must not forget that we still have an extremely skilled and dedicated medical staff of nearly 230 physicians who are choosing to stay in our communities and work in our hospitals to take care of our patients,” Dr. Robin Matthews, an ob-gyn in Haywood County who chairs the Physician Leadership Council of MedWest.

Many of the 2,000 employees of MedWest have rallied to their hospitals’ defense during the past week.

“The hard decision is to stay here and fight for this place to succeed,” said Dr. Casey Prenger, the medical director of the hospitalist group at Harris. “We believe in our hospital and our community, and it is our privilege and honor to take care of you.”

There are huge challenges, however, facing Heatherly and MedWest: hold MedWest together, turn the corner financially, recapture market share from Mission, quell the doctor uprising, and recruit new doctors to fill the holes.

Resolving to make a stand

For the group of Jackson County doctors who went public with their concerns last week, the decision wasn’t an easy one nor was it taken lightly.

“They aren’t trying to hurt anything. They are trying to fix something,” said Dr. Gilbert Robinson, an anesthesiologist at Harris for 10 years.

Even those who spoke out aren’t certain now was the right time, or if it will do any good.

But, the ball was in Adams’ court. When he decided to go public, the core group who had been fighting alongside him during the past year to bring about change internally weren’t going to leave him on a limb by himself, so they reached out and grabbed on as well.

“I decided I wanted to let the community know what was happening to their hospital. The only thing that is going to change is if the community starts standing up for itself to Carolinas and the WestCare board,” said Dr. Waverly Green, a pulmonologist at Harris who is leaving as well.

Adams hopes the issues he raised aren’t construed as a parting shot or chalked up to sour grapes.

“They are portraying those of us who had concerns and discomfort about where we are as being disgruntled and outliers,” Adams said.

But in fact, hospital administration has gone out of its way to praise Adams and the others who are leaving.

“It is regrettable. They will be missed in this community. They are outstanding physicians who have provided years of service to this community,” Heatherly said.

Even doctors in neighboring Haywood, who rightfully have reason to be miffed by Adams’ shot across the bow at MedWest-Haywood, have been complimentary.

“He is a great doctor and wonderful human being. I just happen to disagree with them completely,” said Dr. Marvin Brauer, chief of staff at MedWest-Haywood and a hospitalist like Adams.

While Adams will soon be gone, others who support him will still practice at Harris and will continue carrying the torch to fix perceived problems.

SEE ALSO: Doctors take a stand out of fear for Medwest-Harris' future

Some of them are even on Harris’ payroll. Technically, the entity they are speaking out against writes their paychecks, putting them in an uncomfortable position at best, a vulnerable one at worst. Normally, few doctors would be willing to take a career gamble like that.

The difference at Harris likely comes down to their new president, Steve Heatherly. Heatherly has been with Harris since the 1990s, part of that time as a physician liaison and serving in a variety of vice president roles and as chief operating officer.

In hopes of quelling dissension among Jackson doctors, Heatherly was promoted two months ago as the president of Harris. It gave Jackson doctors one of their own at the helm — rather than the previous hierarchy where they answered to a single CEO for the entire MedWest venture, Mike Poore, who they were acutely aware hailed from Haywood and still had his base office there.

Jackson doctors have hope that Heatherly will help right the ship.

“I believe Steve is at the place he needs to be to help turn WestCare around, due to his experience and background and skill set. I don’t know of anyone else that would be better at this point in time,” said Bob Carpenter, a former MedWest board member from Sylva who resigned in January over the same issues troubling the doctors.

Even Adams agreed.

“I think the WestCare board and Steve Heatherly are doing their best to work with medical staff now,” Adams said.

Many doctors — even those who are in near lockstep with Adams’ pointed assessment of the MedWest landscape — wish he had given Heatherly more time to fix things before going public.

Dr. Randy Savell, a gastroenterologist doctor at Harris, said Heatherly faces a difficult future.

“He is between a rock and a hard place,” Savell said.

Heatherly’s boss is technically Carolinas, and he answers to them daily. But, he must also answer to the hospital board of directors, all the while winning the good graces of nurses and doctors by proving he will address their concerns.

The road ahead

Heatherly doesn’t downplay the reality that a hospital lives and dies by its doctors. If the doctors are good, people will get their health care locally.

“That leads to more volume through the hospital, which helps solve the business dilemma,” Heatherly said.

That business dilemma — dire financial straits for both Harris and Haywood — looms large in the debate.

Harris has lost more than 10 percent of its in-patient business to Mission Hospital during the past five years.

As a result, Harris is struggling financially and has been losing money for at least three years. It’s now in its third round of layoffs in four years.

“Our hospitals must confront the fundamental business reality that expenses cannot continue to be greater than revenue,” Heatherly said.

If the financial picture was rosier, the paranoia among Jackson doctors that Carolinas is trying to siphon its patients off to Haywood could simply melt away.

For now, Heatherly is stuck in a Catch 22. Rather than shrink, Harris must find a way to regain the market share lost to Mission.

“No organization can cut its way to prosperity, especially not a hospital, where quality patient care is our business. ‘Thrive-ability’ will happen when more patients come through our doors to see our brilliant doctors and caring staff,” Heatherly said.

Harris’ financial problems are largely because it lost several doctors back in 2006 and 2007, Heatherly said. When patients needed a doctor’s appointment, they were forced to look elsewhere and ended up walking right into the open, waiting arms of Mission in Asheville.

Heatherly, who started at Harris in the 1990s, had taken a hiatus for a few years to work for a physician management firm. When he came back to Harris in ?, job No. 1 was recruiting physicians to fill the void.

“The organization was having trouble recruiting physicians to replenish the supply to the local community, and it created a constrained access,” Heatherly said.

In 2008 and 2009, WestCare brought in 10 new doctors. It also bought out several private practices in order to put existing doctors on the hospital’s payroll — reflective of a national trend by doctors who increasingly prefer to work directly for a hospital rather than run their own private practices.

Those moves came at a financial cost, but Heatherly said the influx of doctors stopped the bleeding of market share. Unfortunately, it hasn’t come back up yet either.

“Now that we’ve had success in rebuilding our medical staff, we need more patients from our local communities using our local hospitals. Only then can we expect more positive financial results,” Heatherly said.

Heatherly’s belief in doctors as a core business strategy for the hospital seems genuine. He stresses it even when discussing other topics, like when the long-awaited renovations to Harris’ emergency room will be re-started.

“As we move forward, we have to assess that we have the right medical staff in place to offer ongoing appropriate access to care, and then those opportunities to evaluate facility expansion will be driven by the ability to generate sustained financial results,” Heatherly said.

Heatherly was speaking off the cuff, not reading from a prepared statement. But, his hospital administrator’s version of Alan Greenspan’s famous Greenspeak can be boiled down this way: doctors must be shored up first, which will bring back patients, which will bring back money.

A group of Jackson County doctors say they want out of the two-year-old partnership with the hospital in Haywood County and instead would like to look toward Mission Hospital in Asheville as a future partner.

There have been murmurings for months that Jackson County doctors are dissatisfied with the pseudo-merger with the hospital in neighboring Haywood and might want out. But this week marked the first time a group of doctors went public.

“There is a common element of frustration with day-to-day operations, and concern about the financial viability of the hospitals,” said Bob Adams, the chief hospitalist at MedWest-Harris hospital.

Adams, backed by six other doctors, appeared at the Jackson County commissioners meeting Monday to get his message out.

Though the doctors say they ardently support Harris hospital, they are dissatisfied with the MedWest joint venture that united Haywood Regional, Harris and Swain County hospitals under a single umbrella. At the same time, the new MedWest entity signed on with Carolinas HealthCare, a network of 34 hospitals based in Charlotte.

Many doctors in Jackson and Swain now say that was a mistake — and that they don’t trust Carolinas or their own board of directors.

“MedWest is failing and needs to be dissolved. Carolinas is not an acceptable partner,” Adams said. “Mission is the only partner acceptable to the communities west of Balsam.”

Some doctors in Jackson County believe Harris has not fared well in the MedWest joint venture.

Harris is struggling financially. It has seen an outmigration of patients. Doctors, too, are leaving.

Adams said he is one of eight physicians leaving Jackson and Swain counties in coming months. The community already faces a doctor shortage, a factor partly to blame for the loss of market share in recent years.

Doctors in Jackson County also feel that the Haywood hospital is being groomed to become the flagship of the MedWest venture. They fear patients once cared for locally at Harris will be gradually siphoned to Haywood. They also feel Haywood has gotten a greater share of resources. A long-promised new emergency room remains on the back burner in Jackson — meanwhile Haywood used up MedWest’s borrowing ability by taking out a $10 million line of credit to stem a cash flow shortage.

Whether real or perceived, the Jackson medical community has long prided itself on its reputation and didn’t take kindly to the thought of their beloved local institution declining. That, along with a strong independent streak, has doctors questioning the corporate relationship they now find themselves in as culturally incompatible.

“It is clear to me that the hospital that I joined 10 years ago no longer exists, and is unlikely to rise again from its current ashes,” said Dr. Waverly Green, who is leaving the community in a few months. “I am saddened that it has come to this, and ultimately, I think the community as a whole will be left paying the price.”

Adams and Green both blamed Carolinas HealthCare System as duplicitous in bringing about Harris’ plight.

Adams said he does not trust Carolinas to look out for the interests of their local Jackson County hospital.

They say Carolinas pushed Haywood and Jackson together to advance their own long terms interests — namely to mount a competitive front in WNC against Mission, Adams said

After corralling the trio of hospitals under MedWest, Carolinas then began setting the stage for Haywood to be the lead player with Harris and Swain in supporting roles.

“Carolinas wants everything to funnel past us to Haywood and stop them from going to Mission,” Green said.

“It was Haywood-centric all along,” agreed Bob Carpenter, a former board member for WestCare and MedWest.

Carpenter resigned in a show of solidarity with the medical community.

In particular, though, Carpenter believed the board had not been given ample time to consider signing off on $10 million loan documents that encumber the entire MedWest venture for money borrowed by Haywood. Carpenter said board members were called into an emergency meeting in January and asked to sign documents they had not even had a chance to read.

“They said we had to do it to save the MedWest system,” Carpenter said.

Haywood allegedly didn’t have the funds to make payroll and needed the credit immediately.

The Jackson County medical community appealed to the management of MedWest and Carolinas as well as the hospital board of directors several times during the past six months to no avail.

“I realized we were being shut out,” Green said.

Adams has worked at Harris for 36 years and does not take lightly the decision to come forward with his views.

“Some people thought it may do more harm than good and may be more destructive,” Adams said. “A group of the physicians believe the information needs to be made public and our whole intent is to allow the community to make a decision to look further into what is going on and make their own decisions.”

A movement to rein in the dominance of Mission Hospital in Western North Carolina’s healthcare landscape has hit a critical juncture.

A legislative committee studying whether smaller hospitals are suffering from aggressive, monopoly-like tactics by Mission will unveil its recommendations this week. Based on a preliminary report, the committee will recommend new restrictions to help level the playing field for Mission’s competitors.

But, there is early indication the recommendations won’t garner the necessary support in the General Assembly.

To pass, it would need the support of heavy-hitter Sen. Tom Apodaca, R-Hendersonville, who chairs the Senate rules committee. Apodaca has told fellow legislators he won’t support it.

“The senator assured me it would be dead on arrival in the Senate,” said Rep. Ray Rapp, D-Mars Hill.

Without Apodaca’s backing, new restrictions on Mission have “zero” chance of passing, according to Sen. Jim Davis, R-Franklin, even though Davis himself personally supports them.

Another nail in the coffin: Sen. Martin Nesbitt, D-Asheville, doesn’t support new restrictions either. Between Apodaca and Nesbitt — the two senators who represent territory at the heart of the Mission Hospital debate — it’s unlikely senators from other parts of the state would feel strongly enough to go over their heads and push it through anyway.

Smaller hospitals and doctors in the region are fearful that Mission is exploiting monopoly-like power to gobble up market share, causing the slow-but-steady decline of smaller community hospitals by eroding their patient base.

But while Mission’s competitors lobbied for more restrictions, Mission was lobbying for fewer restrictions. It currently is subject to anti-trust oversight dating back to the merger of Asheville’s only two hospitals in the 1990s.

Mission claims those existing regulations handcuff its ability to navigate the rapidly changing dynamics of healthcare and should be lifted.

“It has been 16 years. There has to be a way of gracefully ending this,” said Ron Paulus, CEO of Mission.

The upshot, however: neither may get what they want. If lawmakers buck committee recommendations and decide to leave well enough alone, the status quo will stay in place.

“If it ain’t broke, don’t fix it,” Rapp said.

Rapp said the state shouldn’t do something that could hurt Mission’s role as a life-saving hospital in the region.

“The health and well-being of our citizens should be first and foremost,” Rapp said. “ We can’t put our premier health care institution in jeopardy.”

But, Davis said Mission’s unfair advantage is jeopardizing smaller hospitals.

“I just don’t want any hospital to be preyed upon by a large hospital,” Davis said.

Davis said the anti-trust oversight Mission is subject to was put in place for a reason.

“Whenever you endorse a monopoly, whatever government body blesses that, has an obligation to keep an eye on them,” Davis said.

Paulus said Mission has a critical responsibility in the region as the largest and only tertiary care institution. “I hope you don’t need us but I want to be here if you do,” Paulus said.

It’s doubly hard given the demographics: poorer, sicker, older and less insured.

“The issue is how do we care for the patients in our region when the demographics are so much worse,” Paulus said.

Mission wants to work collaboratively with all the hospitals and doctors in the region toward that goal rather than get bogged down in turf battles no one can afford to wage, Paulus said.

The state committee considering whether to strengthen or weakened the anti-trust regulations governing Mission released preliminary recommendations last month.

Among them: a buffer zone that would stop Mission from setting up certain types of clinics within 10 miles of an existing hospital and a cap on the percentage of doctors Mission can employ in a community.

In Haywood County, MedWest-Haywood hospital has been in a race with Mission to buyout private doctors’ practices and put physicians on the hospital’s payroll as in-house employees.

The trend of doctors working directly under a hospital instead of private practice is a national one, driven largely by economics. Doctors have been getting squeezed by declining insurance and Medicare reimbursements and see employment under a hospital as an easier route.

The fear, however, is that whichever hospital employs doctors can control where they send their patients.

“If Mission buys a practice, the default for that practice would be to send those patients to Mission Hospital, and I am concerned about how all these little hospitals in the western part of the state will survive if that happens,” Davis said. “I don’t think anyone wants our community hospitals to become emergency clinics that feed to Mission Hospital.”

Paulus countered that Mission would not dictate which hospital a doctor should admit and refer patients to.

Nonetheless, Mission’s competitors would like to see limits on how many doctors it can employ in surrounding counties. Currently, Mission’s anti-trust regulations cap the number of doctors it can directly employ in Buncombe County to 30 percent, but there are no caps for other counties.

Fishing for physicians

Mission has come under fire for courting physicians in Haywood County. Mission has also set up a competing medical office complex in Haywood.

But, Paulus said Mission’s motives in extending employment offers to Haywood doctors are not sinister.

“The goal is not to have a single monolithic hospital in the middle of Asheville,” Paulus said, adding “it would never work, parking is terrible.”

Paulus said WNC has historically not been able to recruit enough doctors to serve the population.

“The ratio of doctors to population is well below the state and national average,” Paulus said.

Their salaries here are lower because of the higher number of  poor, uninsured patients. By employing doctors, hospitals essentially subsidize their practices to get them to stay here.

Mission simply wants to ensure a stable of doctors for the region, he said.

“Our core concern is the ablity to attract and retain quality physicians in the community,” Paulus said.

Haywood doctors who are critical of Mission for its forrays in their home territory questioned why, if Mission’s goal was building the physician base, did it try to buy exisiting practices that are already here.

Paulus said the existing practices are the best route for recruiting more doctors.

“It is much easier to recruit into an existing group than create a new group,” Paulus said.

MedWest-Haywood got particularly irked, however, when Mission tried to court Mountain Medical Associates, a key practice in Haywood County with eight doctors across four critical specialties.

Realizing it had stepped on an ant hill, Mission actually withdrew its offer to Mountain Medical Associates, Paulus said. Before doing so, it extended an olive branch inviting MedWest-Haywood to form a three-way partnership with the practice and the two hospitals working together. That way MedWest-Haywood wouldn’t have to shoulder the entire financial burden of adding all the doctors to its payroll, Paulus said.

Paulus said the offer attempted to “reset the playing field and get past old emotions” between Haywood and Mission, but the opportunity was squandered.

Whether perception or reality, MedWest-Haywood had to counter Mission’s offers to buy local physician practices, despite not really having the money to do so.

“They in a sense have been forced into a bidding war with Mission for their own doctors and have had to pay more for those physicians as a result,” Fields said.

That was partly to blame for landing the MedWest-Haywood in a financial quagmire. It barely had enough cash on hand to make payroll and had to get an emergency line of credit to bail it out of a cash flow crunch.

But, those who defend the move say it was critical.

“If you don’t have physicians in your community pushing people toward your hospital, you aren’t going to have a hospital in your community,” said Kirk Kirkpatrick, a Waynesville attorney and Haywood County commissioner who has been active in hospital affairs.

Kirkpatrick said billboards for Mission in Haywood County are a testament that Mission is actively going after patients in Haywood County and trying to pull them away from MedWest-Haywood hospital.

“It is an extremely competitive business, extremely competitive,” Kirkpatrick said. “If you want a hospital in your community that can provide the kind of care you expect then you need to utilize your hospital. If you go over to Mission and you vacate your hospital and don’t utilize it, it won’t be here anymore.”

For more information on both sides of the issue, go to www.wncchoice.com and www.missionfactchecker.com.

Concerns among Jackson County doctors that Harris Regional Hospital is not thriving as it should under a partnership with Haywood Regional Medical Center has prompted a change in top leadership.

Harris once more has its own CEO, and Haywood will be under its own CEO. This marks a step back from the shared management structure the hospitals were moving toward.

“Right now, it is clear that we need to have two very strong managers focusing on their specific campuses,” said Fred Alexander, chair of the MedWest Board of Directors, the umbrella partnership for the Haywood, Jackson and Swain county hospitals.

Until last week, Mike Poore served as the CEO of all three hospitals as well as the umbrella partnership of MedWest. Poore has now been pulled back to his former role of being over Haywood’s hospital only. WestCare, which includes both Harris and Swain County Hospital, will have its own CEO in Steve Heatherly, who was second in command at WestCare prior to the partnership and since then has served the head of the MedWest Physician Network, which employs more than 80 doctors.

Poore said he wants whatever is in the best interest of all three hospitals, even if that means a change in his job title.

“We have to be laser focused on giving the absolute best care at each of our hospitals,” Poore said.

When Harris and Haywood hospitals formed a partnership two years ago, the CEOs of both applied for the top job over the new MedWest entity. While Haywood was seen as pulling for Poore, Jackson was seen as pulling for its own CEO at the time, Mark Leonard. When Leonard did not get the top spot, he left rather than staying on in some other capacity.

Now, Heatherly may be the next best thing. He has been at Harris since 1997, working his way up to CFO, chief operating officer and executive vice-president. Heatherly got his MBA from Western Carolina University.

Alexander said several physicians recently brought their concerns about the direction of Harris to the hospital’s board and management team.

“I think their sincere motivation is to try to see the hospital operating more smoothly,” Alexander said. “As a result we felt both hospitals needed to have direct hands-on management. Our whole desire is to resolve any issue that is present.”

And the clock may be ticking. If Jackson’s medical community isn’t satisfied, they could lobby to pull out of the MedWest partnership in 2013.

While dissolving the partnership may not be particularly easy, there was a clause in the contract forming MedWest that allowed for an out after three years — which is coming up next year. But it would take a super majority of MedWest’s board of directors to terminate the partnership. The board has 14 members — with Haywood and WestCare evenly represented with seven members each — and 75 percent would have to vote to dissolve. Barring that, legal arbitration could be an option.

Not uncommon hiccup

In addition to partnering under the MedWest umbrella, the entity also signed a management contract with Carolinas Health System, a network of 30 hospitals under the flagship Carolinas Medical in Charlotte.

Carolinas Health System has been an astute observer in recent years of mergers and partnerships playing out with smaller hospitals across the state. Hiccups like this are not uncommon, according to John Young, vice president for Carolinas HealthCare’s western region.

“We need someone living and breathing and spending all their time on each side,” Young said. “When you have people going back and forth you feel like nobody is getting the full attention of anybody. We decided it was time to make sure we had enough boots on the ground in terms of leadership.”

Neither hospital has a particularly easy row to hoe these days — whether together or alone. Hospitals and doctors have all been impacted by the recession, as consumers cut back on health care spending and insurance companies and Medicare lower their reimbursement rates.

But the financial challenges in Haywood and Jackson have been exacerbated by competition from Mission Hospital, which has been chipping away at market share of the local hospitals in recent years.

“We have lost too many patients out of our marketplace and that is putting financial stress on the entire organization,” Young said. “If we get grow bigger and get better a lot of this stuff will just fall away.”

The MedWest partnership is still relatively new, and there is naturally going to be an adjustment period as hospitals and doctors who used to be independent begin thinking collectively, Young said.

“We probably are moving it back a little bit form the direction we were going, but if that helps both sides be more successful, then it will help MedWest be successful,” Young said.

As the CEO of all three hospitals and MedWest at large, Poore brought a more collective approach that perhaps the hospitals and medical communities weren’t ready for yet.

“We haven’t been meticulous about accounting this widget went to that campus and that widget went to that campus, but we are going to start doing that,” Poore said.

Several administration functions have been consolidated by the partnership. MedWest shares a nutrition department, marketing department and purchasing department, for example.

But medical care and health specialties have not been consolidated, and there are no plans to make patients trek to either-or hospital depending on the type of treatment they need.

“The end game of everything we are trying to do through MedWest and the individual hospitals is to provide local services for local people,” Alexander said.

Alexander pointed out that if the business side of a hospital — namely how good or bad the hospital is faring — always seems to capture headlines, that’s because it is directly related to its mission.

“Most succinctly, if a hospital wants to do good for its community it must do well financially,” Alexander said.

Alexander said the hospitals may return to a single CEO model at some point.

“We don’t see this as a permanent set up, but for the foreseeable future,” Alexander said. “Change is your middle name if you are a hospital these days. In the life cycle for any organization the form has to follow the functions that are at hand.”

Angel Medical Center in Franklin, one of the last, small independent hospitals in the state, is now part of Mission Health System in Asheville.

After months of negotiations, Angel last week came under Mission’s management umbrella — likely a temporary arrangement on the road to full merger. The move does not come as a surprise. Angel has had a close partnership with Mission for years.

Angel CEO Tim Hubbs equated the deal signed last week to getting engaged after years of dating.

“I would call it the engagement period. I think in short order we might say ‘Let’s go ahead and get married’ but we haven’t set that date yet,” Hubbs said.

Hubbs would not say what would trigger an acquisition by Mission, only that it would be based on certain outcomes being realized over an undisclosed length of time.

While the deal falls short of a full merger for now, most of the benefits of affiliation will be realized right away, Hubbs said.

The move will be financially advantageous for Angel. The hospital can get bulk rates on medical supplies, push for higher reimbursement from insurance companies and get better deals on equipment or contracts thanks to the buying power and leverage that comes with being part of a larger institution like Mission.

Mission already came to Angel’s aid on the monetary front two years ago, when the hospital was about to see its interest rate on some $14 million in debt jump substantially. The debt dates back to renovations and expansions over the years, Hubbs said.

SEE ALSO: The passing of an era? Residents in Macon County say goodbye to independent hospital 

Faced with pressure from the national credit crisis, the bond holders reassessed Angel’s risk level and planned to adjust the interest rate accordingly. Mission stepped in a guaranteed the debt, akin to co-signing for a loan, and allowed Angel to keep its interest rates reasonable, Hubbs said.

Tapping new capital is not a reason for the affiliation, Hubbs said, although at some point that may be a possibility.  

Small hospital challenges

A very costly undertaking for hospitals, and one that has driven other small, independent hospitals around the state to affiliate, is the transition to electronic medical records. The cost of computers and software to go from paper charts to integrated electronic patient records is astronomical, according to Janet Moore, the marketing director of Mission Hospital.

Moore said small rural hospitals have it tough these days. They usually have a high percentage of patients on Medicare and Medicaid, which pay less than private health insurance plans. There’s also a higher percentage of people who can’t pay and have to be written off.

“It leaves them in a real bind,” Moore said.

Mission can provide expertise in the increasingly complex world of hospital management. Picking the right medical code in the maze of billing bureaucracy can make a substantial difference on how much insurance companies or Medicare reimburses for a particular service.

Mission also has experts that can help Angel with best practices, from preventing falls to reducing infections among hospitalized patients, Moore said. It is not just a matter of patient safety, but Medicare and Medicaid won’t pay for infections or injuries picked up during a hospital stay.

“The federal government has said, ‘We are not paying for that anymore.’ They say, ‘That happens in your hospital you eat the cost,’” Moore said.

Another benefit: Angel can now lean on Mission’s reputation when recruiting doctors to locate in Franklin.

“I do think if you are recruiting a physician and you can be part of Mission’s system, it does feel differently for them than just a solo hospital,” Hubbs said.

That’s what inspired Transylvania County Hospital in Brevard to sign a management contract with Mission recently as well.

“What they are looking at is how do they continue to attract specialists and doctors to come there and live and work,” Moore said.

A few doctors affiliated with Mission already hold satellite office hours in Franklin, providing access to specialties otherwise not available in the community.

“We have been able to bring specialists and subspecialists to enhance what the community already has,” Moore said.

Despite fears to the contrary, Mission does not plan to siphon care out of Franklin and send patients to its flagship in Asheville.

“We’re looking forward to working more closely with Angel’s leaders, physicians and staff to help ensure the continued delivery of quality care close to home by this outstanding community hospital,” said Ron Paulus, CEO of Mission Health System.

The hospitals in Spruce Pine and McDowell County both saw both their revenue and the number of doctors practicing in their communities increase substantially following their mergers with Mission.

Angel has long partnered with Mission, both formally and informally. Angel serves as a western base for Mission’s emergency medical helicopter. The two recently embarked on a joint spine center.

Last year, Angel’s board made public that it was pursuing a formal affiliation with Mission. The terms of the contract signed by Angel’s board of directors last week are not being made public. Both institutions are private and not required to disclose details of the deal.

Hubbs would only say that the contract is long-term, longer than just a few years. The financial terms are private as well, such as the management fee Mission may be getting or benefits Angel expects in return.  

Mission facing challenges

The deal comes amidst debate over Mission’s presence in the region. Detractors claim competition from Mission amounts to a monopoly and should be reined in. Supporters counter that Mission is merely trying to provide the region with access to the best health care possible.

State regulators are reviewing Mission’s anti-trust regulations to determine whether they should be tightened or loosened. Meanwhile, a bill has been introduced by Sen. Jim Davis, R-Franklin, that would bar Mission from expanding pending a state-commissioned study. If it passed before Angel inked a deal with Mission, it could have derailed it, but not now.

“There is nothing in the bill that would create an unwind situation,” Hubbs said.

The bill could still hurt Angel from realizing the full benefits of the affiliation. It aims to limit how many doctors Mission can employ, for example, undermining its ability to recruit new doctors to Franklin.

The loss of autonomy, whether perceived or actual, is a likely side-effect of a merger. Two other hospitals that have merged with Mission — namely McDowell County Hospital and Blue Ridge Regional Hospital in Spruce Pine — have preserved a balance of power, however.

The local hospitals kept their own board of directors, although some board members are now appointed by Mission. The local hospital board has hiring and firing authority over the CEO, but the CEO also reports directly to Mission. In essence, the CEO has two bosses. And if he got conflicting orders?

“That has never happened,” Moore said.

Moore said Mission has never expected the CEO to make decisions that benefit Mission to the detriment of the local hospital, thus it’s never been an issue.

That’s what Angel is counting on as well.

“The focus of this agreement is to maintain, enhance and increase access to health services here locally, while maintaining local input,” Hubbs said.

The pending merger of Angel Medical Center with Mission Health System could be sidelined, at least temporarily, by a state bill aimed at limiting Mission’s influence in the region.

Sen. Jim Davis, R-Franklin, said he introduced the bill to offer a check on what he sees as a monopoly by Mission.

It would halt an affiliation between Mission and Angel that has been in the works for more than a year and is now close to a final deal.

“Right now it is in Angel’s court. We are certainly hoping within the next month,” said Janet Moore, director of communications at Mission.

Angel CEO Tim Hubbs said the decision of who Angel will affiliated with should rest with the people of Macon County, not Raleigh lawmakers.

“I have spoken to dozens of long term residents in our area that are outraged by the bill and are very upset with Senator Davis,” Hubbs said.

Hubbs said the bill was a shock.

“We were blindsided by it,” Hubbs said.

Davis met with Hubbs and key hospital leadership a couple of weeks ago to hear their concerns.

“He said the last thing he wanted to do was hurt Angel,” Hubbs said. But Davis has not withdrawn the bill or altered its language.

It is unclear just how much traction the bill has. Mission and Angel may complete their deal before the bill has a chance to move forward.

Davis suggests Mission could exploit its monopoly status to hoard health care services, limiting care patients can get locally and making them drive to Asheville.

But Davis’ bill would cause exactly that to happen, Hubbs said.

Mission will bring more health care service to Franklin, not less, Hubbs said. And without Mission, Angel may actually have to scale back what it provides, having the limiting effect Davis’ claims he doesn’t want.

“I think he has good intentions but the bill ironically would have the opposite effect,” said Trentham. “What he is trying to do ironically will limit free market choice.”

A partnership with Mission will make it easier to recruit doctors, bringing more specialties to Angel. Specialists from Asheville already hold occasional office days in Franklin if the services can’t already be found there.

“Mission and Angel have partnered for a very, very long time. We have been able to bring specialists and subspecialists to enhance what the community already has,” Moore said.

Angel most stands to gain financially. It will get better rates from insurance companies, can get more competitive prices on medical supplies and equipment due to bulk purchasing power, and tap Mission’s expertise on the complicated world of hospital administration and regulations.

“We aren’t to the point where we can’t survive without it, but we are definitely stronger with an affiliation,” Hubbs said.

Davis agreed Angel should be able to align with Mission if it wants to.

“I am not trying to stand I the way of that,” Davis said.

Davis said he understands why small hospitals need to be tied to a larger institution. Angel has 25 beds, and has 16 patients a day on average.

“The small ones just can’t survive by themselves,” Davis said.

But Davis’ bill would halt the merger for at least a year until the issue of Mission’s monopoly can be studied.

Hubbs last month announced he would retire in the next six months, altering solidifying the deal with Mission. That may be delayed now, too.

“I will stay here until we get some thing on the right footing,” said Hubbs.

A state bill aimed at ensuring a balance of power between Mission Health System and smaller hospitals has placed lawmakers in the middle of a healthcare turf war.

As Mission steps up efforts to acquire smaller hospitals and doctors’ practices around the region, some fear the Asheville-based health system will siphon healthcare dollars away from local communities and limit the scope of medical care patients can get closer to home.

Meanwhile, patients don’t want business motives to drive the healthcare they receive. The medical community universally asserts that isn’t the case, even as hospitals jockey over market share and fiercely guard their territory from encroaching competition.

But Sen. Jim Davis, R-Franklin, who introduced the bill, isn’t so sure.

SEE ALSO: Angel close to merger with Mission if state bill stays at bay

“Health care is a business, it is a huge business, and for Mission it is close to a billion dollar a year business,” said Davis, an orthodontist in private practice who represents the six westernmost counties in the General Assembly. “Just like any other business we have to guard against monopolies.”

If Mission’s dominance is allowed to expand unchecked, with more and more doctors and rural hospitals coming under its umbrella, Davis fears everything except routine medical procedures and basic care would be funneled to the flagship in Asheville.

“None of these hospitals in the western part of the state want to be an emergency care center and just shove everything to Asheville,” Davis said. “Local hospitals want to maintain care in the local communities.”

Mission leaders maintain they do not want to suck up business from smaller county hospitals — and if they tried, patients wouldn’t stand for it.

“The data has been very consistent that people prefer their local hospital for routine hospitalization,” said Janet Moore, communications director at Mission.

Mission plays a life or death role for patients across Western North Carolina as the only hospital in the state’s 17 westernmost counties where highly advanced medical care is provided.

It’s not in anybody’s interest to see that function undermined, Moore said. On that point, Davis agrees.

“It is essential that Mission hospital remain strong in the western part of the state,” Davis said.

Yet Moore said the freshman senator’s bill would hamstring Mission: it would bar Mission from affiliations or joint ventures with other hospitals and doctors’ practices until the end of the year, or until a study is completed.

“This bill says Mission has to compete with a different set of rules than everybody else,” said Moore. “We are a little perplexed by the bill. What problem is this legislation supposed to fix?”

Mission is already subject to anti-trust regulations, imposed when it merged with St. Joseph’s Hospital. The state dictates how much it can charge for procedures, sets a profit ceiling and limits how many doctors the hospital can employ.

“We basically operate under a microscope,” Moore said.

Davis questions whether the rules go far enough, however.

“I have heard of quite a few physicians that are concerned about the lack of competition in the medical field,” Davis said.

Davis’ bill would commission a study to determine if those concerns are warranted.

“I have no evidence Mission has done anything wrong,” Davis said. “The whole purpose of my bill is to start a conversation.”

Mission’s frontline

Doctors in the region are divided on whether Mission is predatory in its business practices.

“There always will be a lot of paranoia in healthcare that the big, 800-pound gorilla is going to come in and steal your patients,” said Dr. David Mulholland, a family doctor in Waynesville who is affiliated with Mission.

But, that’s not the case, he said.

“They have plenty of patients. They don’t need any more patients,” Mulholland said.

What Mission does need, however, is referrals for highly specialized care not available at local hospitals — such as neonatal intensive care, open-heart surgery or repairing aortic aneurysms. Mission needs enough volume to cover the cost of highly specialized doctors and equipment. It counts on smaller hospitals to send patients needing advanced medical care its way, Moore said.

But when the hospitals in Haywood, Jackson and Swain counties partnered up last year with Carolina’s Health System headquartered in Charlotte, Mission began fearing those patients could be sent out of the region to Charlotte.

“Hospitals have very small profit margins. If even a small percentage of that business was siphoned off to Atlanta or Charlotte, it would be a big thing. It would hurt access for everyone in Western North Carolina,” Mulholland said.

Mission had hoped the MedWest group of hospitals in Haywood, Jackson and Swain would partner with it. But when they chose Carolinas instead, Mission reacted.

Mission began actively recruiting doctors in Haywood to join its staff. It also set up an outpatient clinic practically next door to Haywood’s hospital staffed by rotating doctors from Asheville.

Critics fear such a toehold could allow Mission to steer patients to Asheville for services. But it could be Mission is merely protecting its interests.

“Would they have had an interest in Haywood County if it was still just Haywood Regional Medical Center? They probably would have said ‘No, it is a stable situation. We get the tertiary referrals and that’s what we need and that’s what we want,’” Mulholland said. But “hospital administrators know the history of what happens when other competing large health care systems come into your area.”

Perhaps the paranoia cuts both ways, however.

MedWest CEO Mike Poore said his hospitals are not sending patients to Charlotte rather than Mission.

“Our referral patterns have not changed at all,” Poore said. “Patients do not have to worry that if a physician is employed by whatever institution that healthcare decisions are made based on anything other than providing the best care.”

When Poore’s own son needed neurosurgery recently, he sent him to Mission, not Charlotte.

“The neurosurgeons at Mission are excellent,” Poore said. “There is no reason for anyone to go beyond there for tertiary care.”

Poore said there are a lot of fears, but they are nothing more than that.

“We are working very hard to work together,” Poore said.

Dr. Stephen Wall, a pediatrician in Haywood County, said Haywood is a great hospital with great doctors, as is Mission.

“I wish we could all work together regionally,” Wall said. “I wish we could do this without always feeling like we are cutting each other’s throats.”

While MedWest frets that Mission is trying to steals its local health care dollars, and Mission frets that MedWest will send patients to Charlotte instead of Asheville, competing hospitals are nothing new in major metropolitan areas.

“It is not uncommon to have surgery center, hospital, surgery center, hospital — all within a stretch of a quarter mile,” said Dr. Chuck Trentham, an anesthesiologist at Angel Medical Center in Franklin. “We just aren’t used to the big business of medicine.”

Trentham said both sides are off in their portrayal of Mission — as a predatory hospital on one hand, or a purely benevolent institution on the other.

“I don’t think they are as bad as they are portrayed, or as good as they portray themselves,” Trentham said.

Angel CEO Tim Hubbs said he does not resent doctors affiliated with Mission providing services in their territory.

“If I didn’t have them coming a couple days a week I may not have an oncologist. For us it is not competition, it is providing a benefit to our community,” Hubbs said.

Wall said the outpatient clinic being run by Asheville doctors could be driven more by doctors’ interests than Mission’s.

“There are probably too many doctors in Asheville,” Wall said. “It is a great area and doctors want to live there, so there is competition for a shrinking healthcare dollar.”

In Franklin, doctors are used to competition from neighboring counties. Several Sylva-based practices have satellite offices in Franklin, holding office hours there one or two days a week, and sending business out of the county to Harris hospital run by MedWest in Sylva.

“The same way Mission is encroaching on MedWest, MedWest is encroaching on us,” Trentham said.

Who’s for it?

While battle lines are being drawn over the bill, exactly how it came to be isn’t completely clear. Davis wouldn’t name names when asked who approached him about the bill or who helped write it.

“I have talked to a lot of people about this bill,” Davis said. “There were hospitals and physicians groups and individuals that encouraged me to file this bill.”

It’s no secret that Park Ridge Hospital in Hendersonville supports the bill, and many believe it was the instigator. Park Ridge has reportedly brought two lobbyists on board to advocate for the bill in Raleigh.

For now, it remains the lone hospital that has gone public in support of the bill.

Park Ridge is part of the Adventist Health System, with 43 hospitals in 12 states. While Davis is a Seventh-Day Adventist, he said he did not introduce the bill to help Park Ridge because of that shared connection.

Davis said there are a “plethora” of theories about motives behind the bill. But he said his primary concern is that “health consumers’ interests are protected.”

Despite tension between Mission and Haywood, MedWest is not for the bill.

“We just don’t feel like we have any standing to support that bill,” said MedWest CEO Mike Poore. “We don’t see legislation as how you deal with competition. We believe in providing good quality health care, strong access and a great patient experience as how we compete, and that legislation is not needed.”

Some in the medical community have accused MedWest of advocating for the legislation, however.

“There has been a lot of goings on behind the scenes and behind closed doors,” Moore said.

Dr. Peter Goodfield, an Asheville cardiologist, claims the legislation was “promulgated by Park Ridge Hospital and MedWest.”

Park Ridge in Henderson and MedWest-Haywood are the region’s biggest and likely strongest hospitals after Mission. Yet their close proximity to Asheville makes it easy, too easy, for patients to defect — and thus have the most to lose should Mission launch an all-out affront.

While MedWest’s official position is against the bill, individual doctors in Haywood County are supporting it.

Three former chiefs of staff of MedWest-Haywood have gone on record supporting the legislation and accusing Mission of predatory practices. They wrote to the state as part of the public comment period on the COPA.

“Taking patients from the local hospital and medical community undermines the strong rural hospital system we are trying to build,” Dr. Shannon Hunter, an ear, nose and throat specialist in Haywood, wrote.

Dr. Al Mina, a general surgeon in Haywood County, believes Mission’s “aggressive expansion” into surrounding counties should be halted while the issue is studied.

“I have seen them duplicate services here in an attempt to weaken the local hospitals and siphon care that can very easily be performed here to Asheville,” Mina wrote.

Dr. Charles Thomas, an oncologist with 21st Century Oncology in Haywood County, has been at war with Mission hospital for more than 15 years.

Mission has attempted to block 21st Century Oncology from opening new cancer treatment centers in the region, from Franklin to Murphy to Marion. Mission challenged state permits for the competing cancer services and filed lawsuits to the same end.

“Throughout these many battles Mission’s ‘mission’ was to prevent competition,” Thomas wrote in his public comments to the state. “Mission will continue to do everything in its power to dictate healthcare delivery in Western North Carolina – even if it means cancer patients have to travel hours to receive necessary care.”

Recruiting doctors

In an effort to temper Mission’s dominance in the region, Davis’ bill aims to cap the number of doctors on Mission’s payroll.

Mission can’t employ more than 20 percent of the doctors in Buncombe County under its current anti-trust regulations. It is approaching that cap now.

Mission asked the state to increase the limit, which may have backfired by opening the door to the current debate. Davis’ bill would immediately stop Mission from employing more doctors during a study period, and would cap the number of doctors Mission can employ to 10 percent for the 18-county region. (The 20 percent cap now applies only to Buncombe.)

It’s not surprising that Mission wants to employ more doctors. It’s a national trend, driven by today’s generation of doctors who find the hassle of running their own office — the stress of being an entrepreneur on top of practicing medicine — isn’t worth the freedom.

It’s also financially attractive. Doctors are increasingly being squeezed by rising overhead and lower reimbursements from Medicare and Medicaid patients. As a result, doctors are gravitating toward a new model of being employed directly by hospitals. The hospitals keep the revenue generated from the patients, while providing a steady salary to the doctors.

But allowing Mission to employ more and more doctors will give them a lock on health care, Davis said.

“Where do you think the physicians are going to refer their patients if they are employed by Mission?” Davis said.

If Angel Medical in Franklin merges with Mission, Davis questioned whether doctors would start referring patients to Mission instead of the much closer hospital in Sylva.

But Mulholland in Waynesville said he does not steer them toward Asheville over Haywood.

“I let them decide where they want to go,” Mulholland said.

“I have no reason to stop using the local specialists. I still talk to and use our local physicians and trust them.”

Mission employs 150 physicians out of 700 who have privileges to treat patients at the hospital. Other hospitals employ a greater percentage of their doctors than Mission does. Angel employs 15 of the 40 doctors on its active staff while MedWest employs 75 doctors out of 230 — both more than one-third.

The majority employed by Mission are specialists. If they had to operate as a private practice, they wouldn’t be here, Moore said.

“There isn’t the volume of work here, for them to maintain their own practice would be financially very difficult,” Moore said.

Specialists employed by the hospital include several children’s specialists, like pediatric cancer and surgery.

“Without those specialists here these families and their children would be driving anywhere from two to four to six hours to get care,” Moore said.

Rural hospitals that have affiliated with Mission in recent years were partly drawn by having a heavy-weight in their corner to help recruit doctors.

Once affiliated with Mission, Angel Medical may be able to attract doctors to Franklin that it couldn’t on its own.

“We have the resources to pay the competitive salaries,” Moore said.

Mission is better equipped to help set up their offices, to buy them the equipment and technology they need, and offer them a larger network of doctors to be a part of, Moore said.

However, Davis has heard that some physicians felt forced to give up their private practices and become employees Mission. State regulators who crafted Mission’s anti-trust regulations obviously thought a cap was necessary, but didn’t foresee 15 years ago that it would be necessary beyond Asheville’s borders.

“There is a reason that was there: to protect physicians’ practices and to protect patients,” Davis said.

But according to Dr. Peter Goodfield with Asheville Cardiology Associates, tightening the cap for Mission when the national trend is moving the opposite direction is ridiculous.

“There are going to be virtually no physicians remaining in private practice. None of us can survive,” Goodfield wrote in public comments submitted to the state.

Mission monopoly?

Mission has already folded three smaller hospitals into its umbrella — those in Marion, Spruce Pine and Brevard. The hospital in Franklin is headed that way.

Mission is also close to a deal to build a $45 million outpatient center in conjunction with Pardee Hospital in Henderson County, seen as a threat to Park Ridge, which is also based in Henderson County.

Mission is not taking advantage of its dominance when it comes to pricing, Moore said. Its is the third lowest hospital in the state for costs, even though Mission has the highest percentage of patients in the state on Medicare and Medicaid — nearly 70 percent — who pay less than other patients.

While Davis talks about Mission’s unfair advantage, Moore said the bill actually stacks the deck against Mission.

Mission’s neighbors include Park Ridge in Hendersonville, run by Adventist Health System, with hospitals in 12 states, and Carolinas Health System in Haywood County, which has 29 hospitals under its umbrella.

“And they are claiming that we are a monopoly?” Moore said. “We don’t mind competing on cost and quality. We just want there to be a level playing field.”

Angel is a stand alone hospital, an increasingly rare status for small hospitals. It can’t continue that way indefinitely and has brokered a deal to merge with Mission in coming months. The bill would delay or even derail it.

Angel might then have to turn to MedWest for a partnership, which already has hospitals in Haywood, Jackson and Swain.

“That’s a de facto monopoly right there,” said Dr. Chuck Trentham, an anesthesiologist at Angel.

But given its market share of only 60 percent in Haywood and 57 percent in Jackson, it doesn’t come close to the definition of a monopoly, MedWest CEO Mike Poore said.

“The contrast to that is Mission’s market share in Buncombe and Madison is north of 94 percent,” Poore said.

What is COPA?

While a bill circulates in Raleigh to limit the dominance of Mission Health System, a state regulatory process is already under way to examine just that issue, independent from the legislation.

Mission is governed by anti-trust regulations dating to its merger with St. Joseph’s 15 years ago. The regulations are up for review, prompting a flurry of debate in the medical community about whether Mission’s ambitions should be curbed or it should be given the freedom it needs to serve as the region’s healthcare leader.

The players

Mission Health System: Memorial Mission merged with St. Joseph’s hospital 15 years ago to form a single, large hospital serving the Asheville area. It has three smaller hospitals under its wing, with plans to add a fourth.

Park Ridge Hospital: Based in Hendersonville and perhaps Mission’s fiercest competitor, Park Ridge is part of Adventist Health System with 43 hospitals in 12 states.

MedWest-Haywood, MedWest-Harris, MedWest-Swain: The hospitals in Haywood, Jackson and Swain counties recently united forming the new entity MedWest and adopting new names in the process. They are 18 months in to a three-year management contract with Carolinas HealthCare System.

Carolinas HealthCare System: As the state’s largest hospital network, the Charlotte-based system has 33 hospitals under its umbrella.

Angel Medical Center: A small standalone hospital in Franklin, Macon County. Angel plan to affiliate with Mission.