Newspaper article THE JOURNAL RECORD

`Boutiques' Grow in Popularity

Newspaper article THE JOURNAL RECORD

`Boutiques' Grow in Popularity

Article excerpt

PHOENIX -- Dr. Edward Diethrich thinks he's invested in the hospital of the future, and its success may come at the expense of former industry trend setter Columbia/HCA Healthcare.

Diethrich performs surgery at Columbia Medical Center, but will soon take his patients across the street to the 59-bed Arizona Heart Hospital, which he bets will provide better heart care at lower cost than Columbia Medical Center and other general hospitals.

"A big general hospital is a thing of the past," says Diethrich, a physician investor in the hospital which is 51 percent owned by MedCath, the manager of doctor practices and hospitals specializing in heart care. The heart hospital is among a small but growing segment of the hospital industry known as specialty or "boutique" institutions that focus on a lucrative type of care to the exclusion of everything else. While still a small portion of the nation's 5,000 hospitals, "boutique" hospitals have raised concerns among consumer advocates, government officials and hospital executives. They argue these specialty hospitals threaten to weaken general hospitals by siphoning off profitable business such as cardiology, maternity and orthopedic medicine. "For the most part, the boutiques are skimming the cream. They're taking the most profitable operations that have subsidized the losing or charity operations of a big hospital," said U.S. Rep. Fortney "Pete" Stark, a top Democrat on health care issues and a critic of for-profit health companies. The hospitals have been popping up around the country, feeding off the drive by managed care health insurers to hold down costs and helped by the absence in some states of so-called certificate of need laws that give states a say in the construction of hospitals. "It's a concern in a lot of places where managed care has heavily penetrated marketplaces," said Rick Wade, senior vice president at the American Hospital Association. Hospitals in those markets face competition that threatens to at least temporarily eat into profitable lines of business. Columbia, feared during much of the 1990s for take-no-prisoners expansion tactics that turned it into the nation's largest hospital chain, now finds itself the target of the boutiques in at least two of its markets -- Phoenix and Denver, where a boutique institution specializing in maternity care and outpatient surgery is poised to steal business from a local Columbia hospital. Columbia, which is now trying to shed hospitals in the wake of a government investigation into whether it defrauded government health insurance programs, minimizes the threat from boutiques. "It's really not something that we have seen as a major issue," said Columbia spokesman Jeff Prescott. Denny Powell, the chief executive of the Columbia Medical Center in Phoenix, vows to make up for the business he loses to the Arizona Heart Hospital. …

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