Build It, They Will Come? Despite Hard Times, Can Tennova Afford Not to Build a New Hospital?

Despite the turmoil surrounding its parent company, Tennova appears to be proceeding with plans to build a hospital on Middlebrook Pike to replace the one off Broadway that we’ve always called (and still do) St. Mary’s.

There is skepticism in the medical community that the hospital will be built, though it would appear that Tennova doesn’t have any choice. The old St. Mary’s building is outdated so a new building has to be constructed. The hospital is losing doctors. The decision to go west of downtown rather than stay northeast is also a contentious matter, but is there any choice there either?

Another hospital answered the siren’s call of “go west.” Profitable Baptist Hospital on the banks of the river downtown built a hospital out west, where the doctors and the patients with the best insurance live. They went bankrupt when the doctors didn’t cooperate.

That hospital is now owned by Tennova, but it’s too small, the professional buildings are owned by a third party, the site is landlocked and has deed restrictions. The stupidity of the Baptist administration knows no bounds.

The doctors are the people who decide where hospitals are located and whether they will be successful. They control their patients. And many of the doctors live out west—and to keep them or bring them back, the new hospital has to go west.

Complicating matters is the turmoil in Tennova’s parent company, HMA. Glenview Capital, a New York hedge fund and the largest stockholder in HMA, has been trying to replace the board of directors because of low revenues and a depressed stock price. Then the HMA board announced the sale of the company to Community Health Systems in Franklin, Tenn. for $3.6 billion (and Community will assume $3.7 billion in debt). The sale has to go through some regulatory hurdles and is expected to close March 2014 if 70 percent of shareholders approve.

But regardless of what happens with the parent company, it will be an on-going multi-billion dollar hospital chain, albeit one with a huge debt. And that entity, if it is to compete in the Knoxville market, has to have a new hospital. Local skeptics say the parent company could buy a lot of community hospitals with the estimated $300 million a new hospital would cost. But if Tennova is to retain its doctors (and thus its patients) they have to pursue building the new hospital.

Though Community Health Systems has been on an acquisition spree in recent years, it seems to have the confidence and backing of major lenders like Bank of America. When this deal is done it will have 206 hospitals in 29 states and own more hospitals than any other company.

The Tennessee Hospital Association says two-thirds of the hospitals in the state have a negative operating margin. That’s medi-speak for they are losing money.

Complicating things for state hospitals is the refusal of state government to take the expanded Medicaid (TennCare) money that covers patients up to 133 percent of the poverty level instead of 100 percent.

In his state of the state speech in January, Gov. Bill Haslam admitted that there are “hospitals across the state, many of them in rural communities, that are going to struggle if not close under the health care law without (Medicaid) expansion.”

In a deal to get the Medicaid expansion, hospitals agreed to give up some direct payments, most notably extra money for hospitals that have a lot of charity cases. So hospitals in Tennessee are going to lose revenue, but they won’t get the offsetting Medicaid money unless the state agrees to take it.

In past years, struggling rural hospitals have affiliated with large hospitals in the cities, acting as feeds to the mothership. But given the state of the hospital industry and the lack of the Medicaid money, one experienced hospital executive I talked to said these affiliations may no longer look attractive to the larger hospitals.

So it is a challenging time for all hospitals, but even more so for those in Tennessee.

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Comments » 6

rockyrocky writes:

"St. Mary's is outdated so a new hospital has to be constructed." A more accurate statement is that parts of St. Mary's are outdated and Tennova doesn't want to spend the money to renovate it. It can and should be renovated so the people in North Knoxville can get the level of healthcare they deserve.

"The hospital is loosing doctors." According to doctors I've talked to, Tennova required them to be on call at both St. Mary's and Tennova's North facility for no extra pay, thus driving them away. Plus they said the rates for office rental at St. Mary's were higher than at North. Tennova is inducing doctors to leave so they can say doctors are abandoning St. Mary's.

"Doctors control where hospitals are located." Everyone wants to work in a new building close to home. Doctor convenience is hardly a sound criteria for establishing distribution of health care in the city. Tennova's plans are based on what they think will bring the most profit. Their claim that doctors are the drivers of their decisions is a diversion from their true motives.

The real issue is that Tennova is abandoning patients in order to gain a profit. St. Mary's will cease to exist as a full service hospital - no emergency room, no acute care, no surgery, no labs, according to Tennova's last public presentation in North Knoxville.

If Tennova is successful, the city will have a lop sided distribution of hospitals that tilts West. That may benefit Tennova's shareholders, but it won't benefit the people of Knoxville.

City Council can stop this by refusing to rezone the Middlebrook Pike site. The state can stop it by denying Tennova its Certificates of Need - one to downsize St. Mary's and another one to build a new building on Middlebrook. The MPC can stop it by denying Tennova at the "use on review" hearing.

cdanojohnson writes:

I just returned from a visit to Ohio to be with my mother, who was having surgery in an inner city hospital. Years ago this particular hospital was "aging", and many wondered if there was still a reason to keep it open. Many other hospitals had moved into the suburbs. Luckily, the hospital stayed. A building that in parts was over 120 years old, in other parts 50 or 60 years old was renovated into a beautiful, state of the art facility that serves a diverse population. It can be done. If it can happen in struggling Ohio (I don't think I need to go into the economic situation in my hometown - Ohio is much like Michigan), it can be done in Knoxville.

TopCutDoc writes:

Despite the fact that numerous physicians live west, all the Knoxville hospitals, except for Tennova North, are within an easy commute. Patients, too, don't need a hospital at their back door, but rather an accessible one with adequate parking.

The old St. Mary's administration made many mistakes before disappearing into the sunset, but the hospital near Fulton High School is needed to care for the population of north Knoxville and central Knoxville.

Many of the staff established their residences near the hospital after obtaining their jobs. Commercial enterprises grew in the area to help those people and the patient families as well as the physicians who worked at the hospital.

Upgrades including operating room rehabilitation, excellent ICU facilities, and modern patient rooms were possible within the framework of an historic facility. More modernization is possible, but Tennova just seeks to chase the money west. They will be invading one of the oldest, organized neighborhood plats within Knoxville, and the neighbors are making it clear that a new Tennova hospital on Middlebrook Pike is unwelcome and unneeded.

It is NOT a given that they must move to west Knoxville in order to survive, or even to make a profit. Wise administrators can make both happen where the facilities currently exist. No survey of physicians has been carried out, despite the administration's claims.

RAND writes:

The Florida based development company, Tennova's local representatives have in public forums and television interviews suggested they want to be good neighbors and they "really want to hear what they have to say".

Now that it is getting out what they have already managed to surreptitiously pull off in Nashville and are attempting to do regarding yet another West Knoxville profit center locally some of those good neighbors are making their voices heard.

The hall way was packed with the overflow at the most recent standing room only Wesley Homeowners meeting. When those in attendance where given the opportunity to speak for and against the project not one person could be found to speak in support.

Listening Tennova? We do not want you or your helicopters as a neighbor.

NeilRN writes:

Mr. Cagle,
Did Tennova's attorneys write this article for you?

Imrightasrain writes:

in response to TopCutDoc:

Despite the fact that numerous physicians live west, all the Knoxville hospitals, except for Tennova North, are within an easy commute. Patients, too, don't need a hospital at their back door, but rather an accessible one with adequate parking.

The old St. Mary's administration made many mistakes before disappearing into the sunset, but the hospital near Fulton High School is needed to care for the population of north Knoxville and central Knoxville.

Many of the staff established their residences near the hospital after obtaining their jobs. Commercial enterprises grew in the area to help those people and the patient families as well as the physicians who worked at the hospital.

Upgrades including operating room rehabilitation, excellent ICU facilities, and modern patient rooms were possible within the framework of an historic facility. More modernization is possible, but Tennova just seeks to chase the money west. They will be invading one of the oldest, organized neighborhood plats within Knoxville, and the neighbors are making it clear that a new Tennova hospital on Middlebrook Pike is unwelcome and unneeded.

It is NOT a given that they must move to west Knoxville in order to survive, or even to make a profit. Wise administrators can make both happen where the facilities currently exist. No survey of physicians has been carried out, despite the administration's claims.

Thank you. Well thought out response. If your moniker is any indication of your profession, I'll take it that you know what you're talking about.

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