William J. Schroeder's new artificial heart is the most dramatic example yet of a trend rippling through the multibillion-dollar for-profit hospital industry.
Increasingly, the major hospital chains -- which accounted for more than $13.7 billion in revenue last year -- are investing in basic medical research and development. They also are actively acquiring nonprofit teaching hospitals, which historically have been the cornerstone of clinical medical education in this country.
These moves, observed one noted medical economist, are a clear signal that the private hospital companies "are attempting to position themselves as full-service health-care providers, not just cream-skimmers who only take the most profitable portions" of hospital care while leaving the indigent cases to the public hospitals.
The industry itself has yet to track its research and development expenditures in any meaningful way. But analysts and industry executives say they plan to increase significantly their investments in these areas.
The artificial heart, which was implanted at the Humana Heart Institute International in Louisville, was underwritten by one of the largest of the for-profit hospital chains, Louisville-based Humana Inc., with more than $2 billion in annual revenue and 17,000 hospital beds. Humana has said it will underwrite more than 100 such artificial heart operations over the next several years as part of its investment in new medical technologies.
The company even recruited heart surgeon William DeVries, the only doctor authorized by the Food and Drug Administration to perform the artificial heart surgery, from the University of Utah earlier this year as part of a corporate effort to establish medical "centers of excellence" in key areas such as burn treatment and orthopedics.
"The key thing about the venture is Humana's commitment to take a risk, and it has to be viewed as commendable from the industry's standpoint," said Roland D. Wussow, vice president of corporate communications for Hospital Corp. of America, the largest for-profit hospital chain with more than $3.9 billion in annual revenue.
"The investor-owned industry has taken its shots in the past several years that it did not invest in education and research. From an HCA perspective, we are very concerned about supporting basic research and education, and there is an opportunity for the investor-owned industry to assume more of a role with diminishing federal and state support."
Wussow also points out that HCA has a venture capital fund that invests in new medical enterprises. HCA owns a 7 percent share of Symbion, the Salt Lake City company that manufactures the Jarvik-7 artificial heart -- the one that was implanted into Schroeder.
The medical chain also announced last week that it had acquired the Wesley Medical Center teaching facility in Wichita, Kan., for about $150 million.
"I would definitely say there is a trend in this area," said Gerald E. Bisbee, a health industry analyst with Kidder, Peabody & Co. Inc. "These companies are now major-class health-care organizations and they want to round out their personalities. They also realize it is to their benefit to be involved in solutions to health-policy problems."
Bisbee said that the major hospital chains all have venture capital arms, and that they are looking to acquire teaching facilities to increase their involvement in the medical community. He said that the chains can be expected to acquire several such facilities in the near future.
"Can you run a teaching hospital more efficiently than they have been run in the past? I think the answer is yes," said Bisbee. "They're not viewing teaching hospitals as loss leaders but as the hub of a medical system. I don't view this as just public relations; I view this as being committed to providing quality medical care."
However, neither Bisbee nor other medical industry analysts dismisses the marketing importance of the publicity surrounding the Humana artificial heart implant.
"Humana has certainly taken a high-visibility step," said Jennifer Finton, a senior vice president with American Medical International, a California-based hospital chain. "Humana was one of the first companies to brand-name their hospitals. The most effective way to promote that is a grandstand play, and this is certainly an excellent grandstand play."
Many doctors have been sharply critical of the hospital chains, saying that they have focused too much on taking advantage of economies of scale and centralized purchasing rather than providing the best possible treatments for patients.
The chains -- which now own more than 8 percent of the nation's hospital beds and will cover more than 15 percent of them within the next five years, according to some estimates -- apparently are responding to criticism with research investments and closer ties to teaching medical facilities.
"We're in the process of adding a different dimension of service," said Dr. Thomas Moore, who oversees Humana's Centers of Excellence program. But he insists that "a hospital must take in more money than it spends or it loses its better people and cannot afford the most effective technology."
Humana's artificial heart program, says Moore, "is a dramatic example of what we are trying to do" to establish the company as a high-quality, state-of-the-art health-care provider.