Rivalry festers between hospitals

May 30, 2009
| By Pete Daly |
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ZEELAND — Tempers are smoldering at Zeeland Community Hospital as Holland Hospital moves forward on plans to build a medical facility, including an urgent care center, less than a mile from ZCH, which opened its own urgent care center there in April.

Michael La Penna, an expert on the business of health care systems, said a state Certificate of Need is not required for urgent care centers, so there may not be much ZCH can do about it — but he added that the recession makes it a "risky venture" at this time for hospitals to compete in capital expenditures.

"I think money (for health care) is going to be scarce."

Henry Veenstra, president of Zeeland Community Hospital, said that in light of a harsh economy and escalating health care costs, Holland Hospital's planned 30,000-square-foot building near I-196 in Zeeland Township amounts to "an unnecessary duplication of those services" already provided by ZCH.

In a news release issued March 17, Holland Hospital president/CEO Dale Sowders said "the decision to develop this property is driven by our mission to meet the health care needs of patients in our service area. Holland Hospital is the leading provider in this area, serving approximately 40 percent of the inpatient and 50 percent of the outpatient markets — more than any other hospital."

The new Holland facility, which will start construction this month, according to a Holland Hospital spokesman, will include doctors' offices, urgent care services for after hours and weekends, a lab and X-ray services.

Sowders declined an interview request when contacted by the Business Journal, but he said in the March 17 announcement that the primary focus of the new facility is "well/preventive care, with after-hours access for minor illness and injury secondary."

Veenstra said construction of more space for doctors' offices is unnecessary because there are "still some empty suites" available for doctors on the ZCH campus.

Both non-profit community hospitals have been around a long time, and both have made significant investments in new facilities within the past several years. Holland Hospital, an organization more than 90 years old, has 209 beds and completed a major expansion program in 2007. ZCH, an organization more than 80 years old, built an entirely new $37 million facility that opened in 2006. The new facility has 57 single-patient rooms plus 15 private emergency exam rooms.

Bob Dean, vice president of human resources and community relations at ZCH, said the new hospital was built two miles further east than its original site to be closer to Hudsonville, "and, frankly, that was two miles farther away from the Holland Hospital. We consciously decided we did not want to invade in their market in any way. We wanted to better serve the areas to the east."

Holland Hospital purchased vacant property last summer near the corner of West Parkway and 84th Avenue, although ZCH officials say they were not aware of Holland Hospital's plans to build a medical office facility in Zeeland Township until December.

After the Holland Hospital announced its new facility in March, ZCH released a statement stating that, in October, Holland Hospital officials told ZCH representatives there were "no plans to develop the property." Then in December, according to the ZCH media advisory, Holland sent Zeeland a letter "stating that they were going to build a medical facility a mile from our campus. We responded with a letter in December from our board of directors asking them to reconsider their plans, which they refused."

Officials of both hospitals met "several times since 2007 to explore collaborative opportunities," according to the ZCH media advisory. It noted that in June 2008, Holland Hospital proposed a merger of the two hospitals "with Holland retaining majority control over the resulting entity, or an acquisition of ZCH by Holland Hospital."

In February, the ZCH board rejected the proposed merger, "not because we want to avoid joining forces, but because we strongly oppose the accompanying vision for Ottawa County health care that would result. They proposed a merger/acquisition that would consolidate operations to Holland. ZCH is committed to serving a broader area that provides convenient access to the Hudsonville, Zeeland, Allendale, North Holland and surrounding communities," said Veenstra.

ZCH "proposed an alternative to the merger: the Ottawa County Hospital Alliance," states the March ZCH announcement. That alliance would consist of Holland Hospital, ZCH, the North Ottawa Community Hospital in Grand Haven and Spectrum Health, and would set "collaborative strategies for expanding access, containing costs, minimizing duplication and improving the quality of healthcare for Ottawa County resident."

Veenstra told the Business Journal that Holland Hospital has not responded to the ZCH proposal.

Michael La Penna founded The La Penna Group Inc. in 1987, a Grand Rapids-based health care business consulting firm.

His firm has had no involvement with the Ottawa County hospitals but he is aware of the situation. He noted the new medical facilities built recently by all three Grand Rapids hospital systems on the M-6 expressway. La Penna said hospitals in general are "bunching up like McDonald's, Burger King and Wendy’s" at high-traffic locations that promise to increase their business.

He said there doesn't seem to be a need for another medical facility near Zeeland.

"There has never been good communication and collaboration (among hospitals) along the lakeshore, from Ludington all the way down to Lakeland" HealthCare in southwest Michigan — "because there is fierce pride," he said.

"Many communities take great pride in having a hospital locally for their residents, even where it may not make economic sense," said La Penna.

"Hospitals are a very fragile business," said La Penna, adding that the economic downturn is affecting hospitals and health care spending policies, "so there may be hospitals at tipping points here — and stuff like this could have an impact."

The Alliance for Health is a nonprofit West Michigan organization with members including health care providers/practitioners, community health agencies, employers, government, individuals and insurers, all in support of high-quality health care services at the lowest cost. Lody Zwarensteyn, president of the Alliance for Health, said both ZCH and Holland Hospital "are very, very valued members" of the organization. Although the Alliance has not taken an official stance on the Zeeland situation, he said "we certainly would hope that organizations that serve similar service markets within our region would be working collaboratively."

Zwarensteyn said there are two potential types of solution to the overlap of the two hospitals, one being consolidation of the two organizations. "Maybe the other route would be to right size the existing facilities, so as to cap the investments that have been made to date in the physical plants."

"There are arguments to be made both ways," he said. "Final decisions really should be based on a clear and objective analysis of the different approaches. I'm not sure that's been put on the table yet."

Zwarensteyn said the volume of patients in West Michigan actually has gone down, to the extent that "you can't really say the total investment is fully warranted."

But regardless of the issue of patient volumes, "there is always the question of what is the better direction for (medical facilities) development for the future? Do you do it under one roof, under multiple roofs, and so on? Those are very serious questions that will have people looking in both directions for answers."

"Clearly, there is a need to coordinate services. Rivalries that result in excess capacity or in excess spending are in nobody's interest. Not today. I would be hoping that the boards would weigh in and would be talking to each other," he said.

Zwarensteyn said in regard to hospitals in general, "There's a lot of rivalry. Look at the billboards" that hospitals lease to promote themselves.

"I'm not going to use the word 'competition,' because it's rivalry. Competition will be when we see the $39.95 weekend special" advertised, he added.

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