Phoebe-Putney Hospital vs. Lee County, Georgia: A Tale of Consolidation and a Little County That Could.

…“I think I can.  I think I can.  I know I can,” The Little Engine that Could.   

As hospital consolidations sweep the nation, the monopolies being created are like insurmountable peaks over which rural communities must climb on their quest to find affordable healthcare.  Lee County, in Southern Georgia, is a little place with big dreams; they are resolutely determined to build a 60-bed community hospital and provide local residents with real choices.  For years, two competing hospitals served the population of 200,000 spread over six counties:  Phoebe-Putney and Palmyra Park. Phoebe-Putney Memorial Hospital put an end to that by securing a 939-bed hospital monopoly and an ample market share.

Their efforts began in 2003, when Phoebe-Putney Memorial Hospital in Albany, Georgia successfully opposed a bid for a Certificate of Need (CON) to open an outpatient surgery center.  Frustrated from a free-market perspective, accountant Charles Rehberg and a local surgeon, John Bagnato, began sending anonymous faxes to local business and political leaders, criticizing the financial activities of the local hospital.   These faxes quickly gained notoriety, becoming known as “Phoebe Factoids.”  Concerned about negative publicity, Phoebe Putney executives hired FBI agents to intimidate these men. 

Undeterred, these two renegades discovered Phoebe-Putney Hospital was charging uninsured patients far more for services than insured patients.   This brought widespread attention to the plight facing millions of uninsured Americans.  Many began to question what obligation a nonprofit hospital has to provide charity care for those in need.  Phoebe-Putney was caught using aggressive collection tactics, such as wage garnishment and the placing of liens on homes of patients unable to keep up with payments.  Their experience inspired a documentary called “Do No Harm.”

In-depth research uncovered millions hidden in offshore bank accounts disguised under the auspices of a non-profit— not only at Phoebe, but also at other non-profit hospitals across the country.  As whistleblowers, Rehberg and Bagnato were subsequently targeted by Phoebe and indicted on fraudulent charges of telephone harassment, aggravated assault and burglary; charges without merit which were dismissed in 2006.  

After successfully blocking the surgery center CON, Phoebe-Putney set its sights elsewhere looking to acquire the only other hospital facility in the surrounding six-county area:  Palmyra Park.  In 2011, the Federal Trade Commission (FTC) attempted to block this proposal on the grounds that the combined entity would control in excess of 85% of the market share.  Phoebes’ CEO insisted hospital consolidation was necessary to deliver cost-effective, high-quality medical care, calling the merger “the right thing for citizens.’’   The FTC argued the deal was anti-competitive (which it was) and health costs would increase significantly (which they did.)  The FTC secured a preliminary injunction but Phoebe prevailed, arguing Georgia CON laws prohibited the sale of Palmyra Park to an independent entity.  

Ultimately, the FTC was obligated to settle with Phoebe, making the dream of a hospital monopoly a reality.  However, the settlement had three stipulations:  1) Public acknowledgement the acquisition would substantially lessen competition within the six-county market; 2) Phoebe was required to provide the FTC with prior notice of transactions acquiring any part of a general acute-care hospital, or controlling interest in other facilities; and 3) Phoebe was precluded from opposing CON applications from other entities for five years.

Barring Phoebe from challenging CON applications was an innovative solution to a monopolized region; however, Phoebe already handily dominated the market.  The Certificate of Need process is expensive and time-consuming; therefore, legal experts anticipated this limitation alone would be ineffective in enticing new competitors to enter the region.  Yet, predictions can sometimes be incorrect.

Enter “The Little County That Could,” a.k.a Lee County, Georgia, with its population of 29,000 and land mass of 362 square miles.  The community and their steely resolve have yielded unexpectedly positive results.  Lee County officials filed a Certificate of Need application for a 60-bed hospital earlier this year.  The Lee County Development Authority will own the hospital structure and a separate entity will lease the facility.  Services offered will include acute and emergency care, including an ICU, medical/surgical unit, inpatient and outpatient beds, and full radiology capabilities, such as CT and MRI.  The hospital will create more than 350 "good-paying jobs" and provide access to health care for all, regardless of their ability to pay. 

While Phoebe Putney agreed not to challenge a CON application until 2020, the settlement does not preclude engaging in “sneaky” public relations tactics.  Phoebe commissioned a study to calculate the effect the Lee County Medical Center would have on the financial outlook for Phoebe-Putney.  DHG Healthcare projected Phoebe will lose more than $250 million in revenue over five years.  The firm found by the third year of operation, annual losses will be $30.1 million for inpatient care, $23.7 million in outpatient care, and $6.4 million for emergency care at Phoebe.

Lee County is on their way to achieving something extraordinary; challenging the dominance of a hospital monopoly.  On July 21, 2017, the CON application for Lee County was deemed complete by the Georgia Department of Community Health.   A decision is anticipated by Nov. 15.  If granted, the county plans to break ground on the new structure in early 2018. The CEO of Lee County Medical Center, Mr. G. Edward Alexander, stated “Our goal is to ensure that decisions for the hospital are made locally by people who live and work in Lee County.”  

Lee County, I salute you.  Medically underserved communities everywhere are supporting your efforts to transform the healthcare landscape for the better.  May your success inspire a revolution, proving that healthcare can be repaired by patients, physicians, and communities – working together.