George Washington University is considering leasing its 511-bed hospital -- the oldest teaching hospital in the city -- to a Beverly Hills, Calif., health care conglomerate, raising community concerns about how poor patients will be handled by a profit-making firm.
American Medical International, the nation's second-largest hospital chain, which bought Doctors' Hospital in Lanham on May 31, recently proposed a long-term lease of the George Washington University Medical Center. The proposal offers to buy the hospital, but "it's leaning toward a lease," said Dr. John Moxley, AMI vice president
The name of the hospital would remain unchanged and nonacademic employes would be retained for at least one year, according to a draft of the agreement. The hospital would be run by four George Washington University officials and three AMI executives, but the California conglomerate would control the budget.
Neither the university nor AMI would discuss the terms of the proposed lease, which is expected to be discussed by university trustees in October. AMI paid about $100 million last June for its first teaching hospital, St. Joseph Hospital, the research facility for Creighton University in Omaha. That hospital included a 418-bed medical-surgical facility and a 121-bed psychiatric unit.
If an agreement is reached, as is expected, George Washington University Medical Center will be the city's first for-profit acute-care facility. The Psychiatric Institute, which is not a full-scale hospital, is the only other for-profit hospital in the District.
Another local university, Georgetown University, hired an investment firm in 1983 to explore whether to change the ownership of its teaching hospital, but the firm's report has not prompted the university to make a change.
George Washington would be the third teaching hospital among AMI's 164 hospitals and health care facilities worldwide, 130 of which are in the United States.
In February, the conglomerate bought the three hospitals in the Presbyterian-St. Luke's hospital system in Denver for $178 million in cash. The University of Colorado medical school is affiliated with the system.
Across the country, the sale of cash-strapped teaching hospitals to for-profit firms has raised community concerns about higher costs, reduced care for the poor, reduction in research budgets and loss of local control.
According to the National Consumers League, there are now 1,200 for-profit hospitals in the United States, or one out of every five facilities. This number has grown 40 percent since 1977.
"In other sales to for-profits, costs to the patients have gone up," aid Cheryl Fish, director of the Coalition for Financial Accountability, one of two community groups that met yesterday with a George Washington University lawyer to voice concerns about how the hospital will handle poor patients, bill collections, admission deposits, unprofitable services, nurse-to-patient ratios and charity care. "GW already has a $4.1 million debt outstanding to the federal government for care of the poor under the Hill-Burton program. How will this make things better?"
The university is appealing a decision by the U.S. Department of Health and Human Services that it did not properly give the amount of charity care required by law to pay back federal construction loans.
Moxley said he was unaware of the government's claim against the hospital, but added, "We are not attempting to shirk our fair share of indigent care . . . . We have commited outselves to maintain the level of indigent care with some reasonable adjustment for inflation." Moxley also pledged to maintain the hospital's teaching commitment, but said research would be best paid for by the federal government and private foundations.
Officials of other city hospitals said they worry that AMI would have a competitive edge because it owns a suburban Maryland hospital that could feed patients into George Washington University Medical Center. If AMI is successful in leasing the university hospital, there would be no requirement that Doctor's Hospital in Lanham refer patients to George Washington University Medical Center, Moxley said, but "in the best of all worlds, we'd like to see tertiary care that gets referred to the District get referred there."
Any change in ownership must be reviewed by the D.C. State Health Planning and Development Agency. Its director, Carlessia Hussein, said she is "trying to meet" with GW officials to discuss the issue. "We have to hold our institutions in the District accountable to the health of the community," she said. "If ownership is too far removed, the risk is increased that they maintain a facility simply for a financial interest."
Although George Washington University Medical Center earns substantial profits, many teaching hospitals are hurt financially by the large amount of charity care they traditionally have given. As consumers seek out cheaper health care, hospitals whose rates include a "surcharge" for charity often must charge higher rates, causing them to lose patients.
"The rate of patient transfers from the for-profit to the other hospitals, called patient dumping, is also unusually high," said Joni Eisenberg, a coordinator of the Health Equal Access League, the second D.C. consumers group meeting with George Washington officials. "How would such policies ffect the already over-burdened D.C. General Hospital?"
Barbara Franke, director of the National Coalition of Nursing Home Reform, said, "This is a downtown, inner-city hospital. The fact that it's going to a firm with a seat on Wall Street, it's got to change its priorities."
George Washington University officials say the change in ownership is aimed at raising millions of dollars for hospital expansion and improvements. Moxley said the hospital needs "significant" renovation and may have to be replaced within the next 20 years.
University officials also have cited a need for cash to buy expensive medical equipment.
Chain hospitals are interested in teaching hospitals because of the potential profits, prestige in owning a research facility and access to a large volume of patients.
"It certainly isn't going to hurt us to be associated with one of the major teaching centers," said Moxley. The George Washington facility, which began teaching medicine in 1825, has been best known in recent years for its treatment of President Reagan following a 1981 assassination attempt.
The city's two other teaching hospitals include the 500-bed Howard University Hospital and the 535-bed hospital run by Georgetown University. Four other hospitals -- the Washington Hospital Center, Greater Southeast Community Hospital, D.C. General and Providence Hospital -- also train medical staff, but are not owned by universities.
Talks between AMI and George Washington began in 1983, when university officials hired AMI to study the idea of leasing or selling its hospital. Four university committees, with members of AMI's corporate staff, studied various aspects of the plan and helped prepare the formal bid.
But the only other firms interested in the hospital, the Hospital Corporation of America, of Nashville, and National Medical Enterprises of Los Angeles, withdrew from the bidding last month, saying that it was clear the university favored AMI.
The university sold controlling interest in its health maintenance organization to AMI in June and university Dean Philip Birnbaum and Vice President Dr. Ronald Kaufman have made no secret of their prior friendship with Moxley, a former dean at the University of Maryland.
"In doing the study we certainly got to know the people there," Moxley said, "but at no time was any commitment made to us that we would be anything more than one of the bidders." A deal between the university and AMI "was not then or is not now wired in any sense of the word," he said.