How Many Hospitals Can Knoxville Sustain?

Eight hospitals in Knox County were unsustainable; where do we go from here?

When I interviewed most of the top Knoxville hospital executives for a magazine article a few years ago there was near universal agreement that having eight hospitals in Knox County was unsustainable. Since that time we've lost a hospital and a few of those executives and we seem poised to lose a few more.

It's important because Knoxville is the health-care center for a good portion of East Tennessee. Health-care organizations, in the aggregate, constitute one of the top five employers in Knox County.

Falling dominoes began with Baptist Hospital opening a new campus on Parkside Drive. Getting a hospital in West Knox County had been the Holy Grail of downtown hospitals for decades. West Knox County is home to people with good incomes, good insurance plans, and many of the county's doctors. But it was a Pyrrhic victory. The new hospital did not have enough doctors (and thus did not have enough patients) and began to bleed money. It led to Baptist's downfall and eventual "merger" with St. Mary's to become Mercy.

Having swallowed Baptist, Mercy is now experiencing the internal bleeding. They need to sell the Parkside Drive campus and merge with UT Medical Center in order to have a sustainable future.

The most logical buyer for the hospital is Covenant Health, which operates Fort Sanders West, a successful operation that needs to expand. But the bad news for Mercy is that Covenant recently purchased land adjacent to Fort Sanders West and appears to be content to expand there rather than take on the Parkside campus. (Unless it's an elaborate bluff.) Covenant's expansion at Fort Sanders West is needed in part because it has hospitals in Oak Ridge, Roane County, and Loudon County that provide community care and feed critical-care patients to the Fort Sanders West Mother Ship.

Since Covenant has the community hospitals going west, it means the Parkside Drive campus doesn't have them. Covenant's problems with buying the Parkside campus are said to be a shortage of parking for a full-service hospital, which would likely require a new parking deck. And Mercy (like Baptist before it) does not own all the buildings. The doctor's-office building (and its rent) is owned by a private entity.

The Parkside hospital also has a large atrium entrance and its only function seems to be the consumption of heating and cooling dollars.

Should Mercy and UT Medical Center merge, the addition of UT doctors and patients might offset some of the problems at Parkside. But it doesn't solve Mercy's problem with having a large empty hospital on the south bank of downtown Knoxville. Doctors and the community are also very supportive of St. Mary's, off Broadway, and moving St. Mary's isn't likely or advisable.

A proposed joint operating agreement between Mercy and UT is viewed with some skepticism by insiders. Can two entities operating in the same market, competing for doctors and patients, really work together? Can two separate cultures mesh to achieve enough savings to make it worthwhile? One of the entities would have to dominate and call the shots on some very real and drastic changes having to do with closing hospitals and renovating others while keeping the doctors and the patients happy.

The market for Mercy and UT is north and east of Knoxville; Covenant is too dominant going west. But a merger between UT and Mercy would create a new organization roughly equal in size to Covenant and thus make it competitive. (But the Covenant juggernaut continues—it is opening a new $60 million building at its Fort Sanders location.)

But, as one hospital expert says, struggling organizations often do dumb things. It will take some smart decisions for Mercy to become successful. Mercy has great doctors, a good patient base, and extraordinary good will. They need to give the Parkside campus to Covenant or UT, whoever will take it. Then auction off the former Baptist hospital downtown. Then get on with providing stellar health care for east and north Knoxville. Otherwise, we may see more dominoes fall.