Phoebe Putney Memorial Hospital in Albany, GA is a 443 bed medical center that serves 26 counties in southwest Georgia. Among many other services it provides acute care, psychiatric care, neonatal intensive care and critical care. It is the largest employer in Albany, GA and it has a stranglehold on medical care in southwest Georgia, and it has created itself into a medical monopoly by using mafia style tactics of intimidation and, at times, just plain brute strength.
In the state of Georgia there exists Certificate of Need Laws in which certain medical centers are the only licensed providers of certain medical services, such as trauma care, intensive care or general surgery. CON laws were, supposedly, enacted in order to protect hospitals by controlling competition and limiting medical costs for the upkeep of certain services. If a hospital has a CON then they are the only hospital allowed to provide those extremely profital medical services. CON laws also prevent surgeons from providing certain medical services, like surgery, in approved private centers outside the hospital. Phoebe Putney has a CON in Albany, GA and they guard it jealously.
Patrick John McGinley wrote an extensive study on CON for the Florida State University Law Review, in which he stated that "managed competition" is a healthy alternative to CON laws for medical care providers (note: McGinley is describing Florida CON but his analysis is still right on in regards to Georgia):
Managed competition intends to control health care costs by encouraging price competition among health care providers. In a typical managed competition plan, such as that recently enacted in the state of Florida, a state agency negotiates on behalf of many purchasers in order to demand lower prices from providers. Managed competition, therefore, attempts to lower costs by managing demand.
Supply, and not demand, was the emphasis of early health care regulation. "Certificate of need" (CON) laws were designed to keep health care costs low by requiring advance approval by state agencies for most hospital expansions and major equipment purchases. Congress required all states to pass CON laws in 1974, but quickly repealed that requirement after finding it ineffective for controlling health care costs.
Just in the past six years healthcare costs in the state of Georgia have risen 66%, and all this is done under CON laws. It is obvious that they are not effective in controlling healthcare costs for Georgians. So why do we have them?
One may question the wisdom of continuing any form of state regulation that failed to produce its desired goal when implemented nationwide. As the review of Congress's intent indicates, CON had one goal—to save money. However, in those states which retained their CON laws, the retention was often supported by new and creative justifications, many of which were unrelated to saving money. Commentators, in their traditional role of explaining the reason behind events, have set forth many justifications explaining why states have kept the same old CON laws. All these justifications, however, are the crafty work of commentators, and not the motivation of state legislatures. No state legislature has codified any of these new justifications as legislative intent. These justifications should therefore carry little weight in a proper analysis.
Even though CON perseveres, the rationale supporting CON has disappeared. The logic of CON was based on the health care marketplace as it existed in the 1950s through the early 1970s. Today's medical marketplace is significantly different. CON is predicated on a medical marketplace dominated by third party fee-for-service agreements. However, the modern medical marketplace is shifting away from fee-for-service. The institutions who are the primary purchasers of health care services are banding together with the aid of governments.
Notice that it is only the "commentators" who desire to retain CON laws in their respective states. I wonder who those commentators are:
But Phoebe officials say high poverty and disease levels in South Georgia make CON essential to keep their doors open. "To assure that the weakest among us has access to quality health care services," [Phoebe Putney CEO Joel] Wernick said.
Interestingly, there is the possibility that the Georgia Legislature will revisit the CON laws in 2007 and, possibly, make several much needed changes. Hospitals, like Phoebe Putney, are going apeshit at the possibility that they could lose their highly desired monopolies:
Hospital consultants say it protects the fragile financial condition of the health care system in Georgia. Hospital consultant and one-time state legislator Tommy Chambless said, "There are so many rural hospitals that are operating in the red, that if it were not for CON, many of those would collapse."
Bagnato said hospital administrators are playing the fear game. "Hospitals in Georgia last year made over $900 million in profit, in profit."
It stands to reason that major hospitals that benefit from CON laws would be a medical apocalypse if their legality were overturned. In south Georgia it is especially tough with the absence of competition and CON laws extending over large areas of the region benefiting medical centers like Phoebe Putney. This has forced health care costs for south Georgians to skyrocket. Just recently Phoebe Putney raised prices at its hospital:
A recent study showed the cost of health insurance premiums in Georgia jumped 66% in just six years. This week, insurance salesman and outspoken Phoebe critic David Prisant placed much of the blame on hospitals like Phoebe who operate certain services under limited competition. He cited oncology as an example.
Wernick says there are no rules limiting competition for medical oncology. He says Phoebe has a state-approved monopoly on radiation technology because of the high cost of the high-tech equipment required. Wernick says community hospitals such as Phoebe actually face competitive disadvantages because they guarantee care for patients who may not be able to afford to pay their bills.
In Albany, GA Phoebe Putney has limited competition, the sacrifical lamb being Palmyra Medical Centers a private, for-profit medical center which offers several important services, but many of the big money ones are denied to them.
Just recently, I was at Tift Regional Medical Center in Tifton, GA because my son was having minor surgery performed, and my wife found a pamphlet in one of the waiting rooms that defends CON laws in Georgia and predicts dire consequences if those laws are revised. It is from Save Georgia Healthcare a "coalition of Georgia's hospital, physician and business communities. Founding organizations include the Georgia Hospital Association, the Georgia Alliance of Community Hospitals, Hometown Health, HCA Healthcare, and Tenet Healthcare." Like I said the pamphlet predicts dire consequences if CON laws are revised and explains the "good" that is done and can be done if Georgia retains those CON laws. In the end it asks that thsoe who are concerned contact their legislatures and fight for the right of hospitals like Phoebe Putney to legally retain their medical monopolies (okay, so I'm paraphrasing).
The organizations are basically hospital lobbyists fighting to preserve the high profits of hospitals. Don't believe me? Notice that HCA Healthcare and Tenet Healthcare refer to themselves as Hospital Corporations. Of course they are concerned about the huge profits many hospitals stand to lose because the nature of open competition in the healthcare market will force prices to go down. They want to preserve their monopolies, their ability to basically fix prices at any level they want without fear of another hospital or ambulatory surgical clinic being able to offer competition that will drive the prices down. See how easy these medical monopolies can develop under Certificate of Need.
Hospitals like Phoebe Putney, and organizations like Save Georgia Healthcare claim it is about cost and the protection of Georgia hospitals, but when Albany Endoscopy Center, Inc. applied for a CON to build an ambulatory surgical center, Phoebe Putney immediately went into action to stop it:
Phoebe Putney Memorial Hospital CEO Joel Wernick said Wednesday that he would be recommending to the Phoebe Putney Memorial Hospital and Phoebe Putney Health System boards that the hospital challenge the application.
They didn't quote costs and they didn't quote protection of hospitals, as a matter of fact they didn't give a reason at all. The reason is something they don't want Georgias to understand, that they aren't in favor of keeping costs low or protecting hospitals, more competition challenges their high profits and they can't deal with that and will fight with every ounce of their being to prevent it.
Phoebe Putney, like I said, is a prime example of a medical monopoly, but they also have characteristics of a mafia cartel, using strongarm tactics to achieve whatever goal they seek. Meet Julia Lemon, an elderly 93 year old woman whose home stood in the way of Phoebe Putney's desire to expand. Lemon fought the hospital as long as she could but the courts had no choice but to rule in Phoebe Putney's favor as at the time they were within their right to use eminent domain to seize Lemon's home:
You now have more protection against having your property seized by the government. A Georgia constitutional amendment voters approved Tuesday will prevent private businesses from seizing your property.
Sadly, though, the law is too late for a 93-year-old Albany woman who's home was seized by Phoebe Putney Hospital.
Friday morning, a giant earth mover started destruction on the Fourth Avenue home at the center of a controversial eminent domain lawsuit last year. Phoebe Putney's Hospital Board used eminent domain laws to seize 93-year-old Julia Lemon's home of a quarter-century.
Phoebe wanted the property to expand its Family Tree Early Child Development Center, which provides daycare services for their employees. The house owner, Julie Montgomery, fought Phoebe in court to keep her friend Lemon's home, but the hospital board then had the power to seize the home and did.
I wish I could say that was their last instance of mafia tactics:
Charles Rehberg was sued by Phoebe in August 2004 after a series of anonymous faxes critical of the company were sent to Albany area leaders. Phoebe launched a private investigation to discover the source of the faxes and traced them to Rehberg and a prominent local surgeon, Dr. John Bagnato.
...
Rehberg said the investigators, former FBI agents, threatened him and his family. The company dropped the charges two months later, but Rehberg had filed a countersuit.
I mean, really, what does that sound like? Does it sound like the actions of a concerned hospital, or the Gotti family?
Let's just use common sense: if one entity is the only entity to offer a particular service, an important service that is necessary for others to use, then they can charge anything for that service, especially if insurance companies exist to compensate costs and reimburse that entity. Simple economics says, demand HIGH and supply LOW equals HIGH PRICES. How do we counteract that consequence? The simple answer is to increase supply because, again this is simple economics, supply HIGH and demand HIGH equals LOW PRICES.
Hospitals and their associated lobbying organizations also say that CON laws help protect hospitals by keeping them from having to provide high cost services that will end of ruining the hospital. Again, let us use common sense, what kind of hospital who seeks to stay in business and maintain a profit, they are corporation now after all, will open a particular service, like oncology, unless they know that they can make a profit for that service. If there isn't a demand for the service then the hospital isn't going to waste all their money and potentially have to shut down in order to provide that service. CON laws act as though hospitals are only kept from jumping off the cliff by the railing and not their own common sense or instinct for survival.