frank_talk (2007-12)

A Bitter Pill

Baptist may have to do deal with Covenant, and it won't be easy to swallow

by Frank Cagle

They have dispensed a lot of pills over at Baptist Hospital over the years, but the bitterest pill is the one the hospital's board may soon have to swallow.

There are eight hospitals in Knox County. (See below.) They all lose money. They are kept afloat by foundations, telethons, subsidiary businesses and bequests. Most all the hospital executives you talk to will tell you the situation can't continue indefinitely and that some consolidation needs to happen. It's just, given the fierce competition, no one wants it to be their organization.

Baptist Hospital was financially solvent and doing well not so long ago. Its professional building and its center to treat heart disease, perched across the river from downtown, are outstanding. (Full disclosure: they performed a quadruple bypass on me, and the procedure and the care could not have been equaled anywhere. They also saved my son's life a few years ago when he came home from UT with a burst appendix.)

Covenant Health, and its previous incarnation as Fort Sanders, purchased Park West Hospital and nailed down a semi-monopoly in insurance-rich, well-to-do West Knox County, leaving the other hospitals clustered around downtown Knoxville. Getting into West Knox County has been the Holy Grail in Knoxville's health care industry.

Covenant, protecting its turf, battled furiously to keep the other hospitals out. But Baptist finally managed to push through approval from the state and proceeded to build new facilities on Parkside Drive. Covenant did not appreciate it. They moved to nail down the doctors to keep them at Parkwest and affiliated with Covenant. Baptist awoke to discover they had beautiful facilities, great equipment and very few doctors. And some of the doctors they did get, they robbed from themselves--they stayed home in West Knoxville rather than drive downtown. Without the docs, you don't get the patients.

There are other factors, but the financial drain of the West Knox County facilities is at the root of Baptist's current financial crisis. The Baptist board has tried several approaches. Selling to a private hospital chain is problematic--the non-profit is tax exempt, but if taken over by a private firm a huge tax bill is due. It is a drag on a private deal. Baptist has looked to an alliance with St. Mary's and UT Hospital. The board specifically ruled out a deal with Covenant. The reason given was an anti-trust issue, but the real reason is that the Baptist board despises Covenant and the people that run it. They see Covenant, in protecting its franchise, as the enemy. St. Mary's and UT may have the resources to take over the Baptist downtown operation--but they do not have the resources to take on the West Knox County campus, which includes a hospital and a hospital for women. It would weaken them in the same way it has been a financial drain on Baptist.

Baptist may be a non-profit exempt from aggressive stockholders, but they have other financial pressures. The financial institutions that hold their bonds are pressuring the board to find a solution. The Baptist board's options are being narrowed daily. The prospect of a White Knight, from outside Knox County, rescuing Baptist operations are not good. Baptist has been a well-managed operation. If they are caught in a financial straddle with the West Knox County operation, how can a new entity do any better?

There are too many hospitals, and there needs to be some consolidation of operations and a reduction in redundancies. The best solution is for Baptist to sell its West Knox campus to Covenant and work out an agreement with St. Mary's and UT for the downtown facilities. They may find another solution, but it is not apparent. The board is under the gun from the bondholders to come up with a solution, and this may be the only solution available.

Baptist has a number of distinguished and capable people on its board. I feel sure they will do what they have to do to see that quality health care continues in Knoxville, regardless of how distasteful they find the decision to be. We don't need another player in the Knoxville market. Consolidation among local hospitals is the best solution for the community.

(Note: You didn't believe the eight figure, most people don't. Knox County contains Baptist downtown, Baptist West, Fort Sanders, Fort Sanders West, Children's Hospital, UT Hospital, St. Mary's on Broadway and St. Mary's North, off Emory Road. In addition to these eight hospitals there are hospitals in Oak Ridge, Harriman, Lenoir City, Blount County, Sevier County and Jefferson City, totaling 14 hospitals in the Nine Counties with One Alleged Vision.)

Frank Cagle is a political analyst and the editor of Knoxville Magazine . You can reach him at frank@frankcagle.com .