\n<\/p>\n
Moore didn\u2019t stay long in Albany. He knew the fight to overcome the competition from Palmyra would always be ugly. Closer to the end of his career than the beginning, he didn\u2019t have the energy for it. But he knew someone who did, his 34-year-old prot\u00e9g\u00e9, Joel Wernick. The two men had met when Wernick was a star right guard on his high school football team in Fort Smith, Arkansas, and worked as a groundskeeper at the hospital that Moore ran. Wernick was brash and competitive, Moore told me, and he encouraged him to go to business school and pursue a job like his.<\/p>\n
Wernick took Moore\u2019s advice and became part of a growing number of hospital administrators who\u2019d been trained in business, not medicine. \u201cThey were the kind of men \u2014 and the vast majority of them were men \u2014 who would walk into a room with a pregnant woman and immediately know how much her care was going to cost, rather than the kind of person who could walk into that same room and know immediately what care that woman would need for a safe delivery,\u201d said Richard Ray, a former Phoebe vice president. \u201cThey\u2019re both important, but they have different priorities.\u201d<\/p>\n
In 1988, Moore recommended Wernick to the Hospital Authority of Albany-Dougherty County, whose nine members approved Phoebe\u2019s spending and operations. From the moment Wernick arrived in Albany, his No. 1 priority was to get rid of Palmyra. He had a powerful ally in the chair of the authority, William Harry Willson, who would hold the position for 31 years. A Harvard Business School graduate, Willson had converted his family\u2019s pecan farm into a successful mail-order business, helped found a local bank and became the city\u2019s leading philanthropist.<\/p>\n
Albany\u2019s economy had shifted from agriculture to industry. In 1968, Firestone had opened a factory that employed some 1,600 workers. Procter & Gamble had built a paper products plant in 1973. Within the city\u2019s white establishment, old and new money were vying for influence. Willson and Phoebe represented the old, Palmyra the new. To hear Phoebe\u2019s supporters explain it, Palmyra was driven by racism and greed. Not only did it provide scant care to the poor, but it had no obligations to invest any of the money it was making off of Albany into Albany. Meanwhile, as a public hospital, Phoebe was legally obligated to serve the poor, and in the years when the hospital ran a deficit, the county\u2019s taxpayers were on the hook to make up the difference.<\/p>\n
Willson moved to make Phoebe a business, too. Among his first instructions to Wernick was to reach out to Palmyra\u2019s parent company and offer to buy it out. When the Hospital Corporation of America turned him down, they decided that the only way Phoebe could compete was to expand, and the only way it could expand was to change its governance.<\/p>\n
The two persuaded Dougherty County to relinquish oversight of Phoebe and transfer it to a private management company that would also finance its operations. Under the new structure, the county would retain ownership of the actual building but lease it to the new entity for $1 a year.<\/p>\n
That lease still stands as the county\u2019s only leverage over how the hospital is run. County officials can revoke it without warning, although the conditions of the lease leave a lot to Phoebe\u2019s discretion. It broadly requires that Phoebe provide quality care to the community at a reasonable cost \u2014 without defining what that means \u2014 that it spend 3% of its revenue on free and subsidized care for the poor and that it uphold Phoebe\u2019s founding promise to treat all people, no matter their ability to pay.<\/p>\n
First image: Hospital authority chair William Harry Willson, left, and Phoebe CEO Joel Wernick in 1988. Second image: The construction site for Phoebe\u2019s medical tower two years later.<\/span> Courtesy of Phoebe Putney Memorial Hospital<\/span> In one image, two men with gray hair wearing suits pose together in an office. In another image, two men stand together in a large dirt clearing. Behind them is a towering white building. The man on the left has his hand raised over his eyes blocking the sun.<\/span><\/p>\n With that move, Phoebe Putney Memorial Hospital became the centerpiece of the Phoebe Putney Health System. Controlled by Wernick, the health system was now free to pursue business ventures in the wealthier suburbs outside the county limits with the same tax-free status as before but without the same burden of public scrutiny.<\/p>\n Under Wernick and Willson\u2019s leadership, the hospital authority approved\u00a0hundreds of millions of dollars in bonds for the construction of new clinics, office towers and medical wings, including some that weren\u2019t in Dougherty County.\u00a0Rather than staging hallway tirades to get doctors to refer their paying patients to Phoebe, Wernick bought their practices. He lobbied to prevent Palmyra from obtaining a state license to deliver babies by using Georgia\u2019s strict certificate-of-need provisions, which put limits on the kinds of health care services that can be provided in any one market.<\/p>\n The laws are meant to prevent massive chains from squeezing out smaller hospitals, but in practice they often stifle the competition. Wernick refused to negotiate rates with managers of factories who complained that the costs to insure their workers in Albany were higher than in other cities. When Blue Cross, Georgia\u2019s largest health insurer, moved to include Palmyra in its health care plans, Wernick threatened to withdraw from the network if it went ahead with the deal. It did not.<\/p>\n In 10 years, Wernick dramatically reshaped Phoebe from a small community hospital in a small city to a behemoth hospital system spread across the state. In 1998, a decade after Wernick arrived, The Wall Street Journal reported that the hospital\u2019s profit margins were double the national industry average. Along the way, though, he had made enemies. In 2003, Phoebe\u2019s chief of surgery and a local health care accountant started sending a series of anonymous faxes to businesses, accusing Phoebe and Wernick of an array of excessive and predatory behavior. The faxes, called Phoebe Factoids, were drawn from public records and leaks. A lot of the allegations they made were true \u2014 that Phoebe paid its executives high six-figure salaries; that it treated the members of its board of directors to all-expenses-paid trips to Europe and the Caribbean; and that it employed aggressive measures to collect medical debts from the poor. But the information was couched in so much spin and crude innuendo that it wasn\u2019t easy to tell what was accurate and what wasn\u2019t.<\/p>\n A Phoebe Factoid critical of Wernick and the hospital<\/span> Obtained by ProPublica<\/span> A comic with a photocopied quality to it shows a portion of a Monopoly board labeled \u201cPhoebe.\u201d A couple spaces on the Monopoly board read \u201cCollect $800,000 As You Pass Go\u201d and \u201cPhoebe Northwest $22,000,000.\u201d<\/span><\/p>\n For months, the Factoids held Albany in thrall. Wernick used his connections in the district attorney\u2019s office \u2014 led by a Putney descendant \u2014 and a former FBI agent to help him investigate who was behind them. Once he knew who the authors were, Phoebe sued one of them for defamation. They brought their own suits against Wernick and Phoebe, accusing them of retaliation. Each side denied the allegations.<\/p>\n Eventually the faxes stopped, and the lawsuits were dismissed or dropped, but not before attracting attention from state and national media, which, in turn, got the attention of Iowa Republican Sen. Charles E. Grassley. The chair of the Senate Finance Committee, he was launching an investigation\u00a0into whether nonprofit hospitals like Phoebe were giving enough back to their communities to justify what they were receiving in tax breaks.<\/p>\n The committee released its findings in 2006, and they were devastating. Among the 10 hospitals that answered the senator\u2019s questions, eight of them submitted information about the amount of free and discounted care they provide to the poor. According to the committee, Phoebe\u2019s terms were the least generous. It offered free services only to people whose income was under 125% of the poverty line and discounted care to those below 200%. Under those terms, a single mother with two dependent children who earned more than $21,000 a year would not qualify for free care. The other seven hospitals covered patients whose income was at least one and a half times that much.<\/p>\n Even more damning was how aggressively Phoebe pursued patients with medical debt. The hospital told the committee that it had filed lawsuits against more than 1,000 people during the previous five years and that nearly 40% of those suits involved people who owed less than $500.<\/p>\n Decades later, when I spoke with Dean Zerbe, who led the Grassley investigation, he got worked up again about Phoebe\u2019s debt collection practices. \u201cThey weren\u2019t doing that because they genuinely expected to collect $500,\u201d he said. \u201cWhen hospitals go after people like that, it\u2019s because they don\u2019t want them to come back.\u201d<\/p>\n Three former executives at Phoebe told me that the Grassley report rattled Wernick, because he couldn\u2019t disparage the findings as a \u201cterrorist conspiracy\u201d the way he had done with the Factoids. It wasn\u2019t the only public relations hit. The Albany Herald published an accounting of the properties the hospital was acquiring in the downtown historic district, raising questions about the drain on the county\u2019s property tax base. In 2006, The Associated Press reported that Phoebe had used its relationship with the county government, which has the power of eminent domain, to force a 93-year-old retired domestic worker named Julia Lemon out of her home. The hospital wanted to raze the house so that it could expand a day care center for its employees. A jury ruled in Lemon\u2019s favor.<\/p>\n That same year, the Albany Herald obtained a deposition in which the hospital\u2019s chief financial officer revealed that Wernick\u2019s compensation came with a long list of perks, including a country club membership, six-figure bonuses, an automobile of his choice every three years and a termination agreement guaranteeing that if he was fired for cause, he\u2019d receive three years pay unless he was convicted of a felony. This was on top of a $650,000 salary.<\/p>\n If all that wasn\u2019t enough, in 2009, the battle between Wernick and the authors of the Factoids became the subject of a feature-length documentary. The timing of all the coverage couldn\u2019t have been worse. Plants in Albany had begun to shut down, and thousands of people were being thrown out of work: Bob\u2019s Candies (236 employees); Merck (273 employees); MacGregor Golf (200 employees); Flint River Textiles (230 employees); and, the biggest hit, Cooper Tire, which had replaced Firestone (1,268 employees). On their way out of town, plant managers complained that one of the reasons for the closures was the high cost of health care.<\/p>\n Sandra Morris was a human resources manager at the Procter & Gamble plant, which didn\u2019t close but whose workforce has shrunk over the years. \u201cI was trying to do everything I could to lower our costs,\u201d she told me. But, she added, \u201cI was fighting a monstrosity of a hospital.\u201d<\/p>\n The battle with Palmyra ended when Phoebe least expected it \u2014 when it looked like it had lost. Palmyra applied in 2008 for a license to deliver babies. Phoebe spent millions of dollars, including $8.8 million to the firm of its lead attorney, Robert Baudino, to challenge the request. Palmyra took its case to court, charging Phoebe with a host of antitrust violations, and it won. In April 2010, the 11th U.S. Circuit Court of Appeals ruled against Phoebe and, in remanding the case, recommended that the health system could be held liable for damages amounting to three times the value of any provable harm.<\/p>\n Those who worked with Wernick told me that he saw the ruling as a matter of life and death. The damages Phoebe might have to pay would gut its finances. Just as troubling was that Palmyra\u2019s ability to begin delivering babies would have dealt a significant blow to Phoebe\u2019s ability to compete for patients. I\u2019ve spoken to numerous people about Wernick, and the one quality that both his allies and detractors agree on is that his determination to win was extreme. Where they disagree is about his motives. His supporters say that he operated on the belief that what was good for Phoebe was good for Albany and that it was his commitment to doing right by the community that compelled him to fight as hard as he did.\u00a0To his critics, he was only interested in building a health care empire, whether that was what Albany needed or not. Lynda Hammond, a former Phoebe vice president, told me that for Wernick \u201cit was all about being the only hospital, not the better hospital.\u201d<\/p>\n Three months after the 11th Circuit\u2019s ruling, Wernick dispatched Baudino to Hospital Corporation of America\u2019s headquarters to discuss, again, Phoebe\u2019s interest in buying Palmyra. The only public records of how the deal was consummated come from the filings made by the Federal Trade Commission, which mounted a legal battle to undo it.<\/p>\n According to those records, HCA seized on Phoebe\u2019s vulnerability and asked for $195 million in cash, which was more than twice Palmyra\u2019s net revenue for the previous 12 months and which the FTC said \u201cfar exceeded\u201d other recent hospital deals. HCA demanded that the agreement be kept confidential until it was signed. Also, if the acquisition failed to go through, either because of antitrust challenges or opposition from the hospital authority, Phoebe would have to pay the chain a breakup fee of some $52.5 million.<\/p>\n Wernick presented the terms to the hospital authority a week before Christmas. Baudino, Phoebe\u2019s lawyer, was assigned to represent the authority. As the FTC would later point out in a legal complaint, this put him in the position of both pitching the merger and weighing its merits. He recommended that the authority approve the deal. Seven of its nine members attended the meeting, and they voted unanimously in favor.<\/p>\n Feelings among the residents of Albany, who didn\u2019t learn about the purchase until after it was signed, ranged from confusion to outrage.\u00a0The Albany Herald quoted opponents to the deal saying that it was \u201cmind-boggling\u201d that the hospital authority would agree to a merger of this magnitude without taking time to do an independent assessment of its potential impact on the cost and quality of care. They accused the members of the authority of conducting themselves as \u201cagents of the hospital\u201d rather than representatives of the public good.<\/p>\n Within months, the FTC sued Phoebe, describing the hospital authority as a \u201crubber stamp\u201d and the deal as a \u201cmerger to monopoly\u201d that would \u201ccause consumers and employers in the Albany region to pay dramatically higher rates for vital health care services.\u201d The agency pointed out that many people in the city were \u201calready struggling to keep up with rising medical expenses.\u201d It added that the merger was also likely to \u201creduce the quality and choice of services available.\u201d<\/p>\n Over the years Phoebe had done many things to lose the confidence of the community it was supposed to serve, but the purchase of Palmyra \u2014 at a huge cost, revealed only at the last minute, without public input or any assessment of its repercussions \u2014 was a turning point for many residents.<\/p>\n","protected":false},"excerpt":{"rendered":" Chapter 4 \u201cIt Was All About Being the Only Hospital\u201d Moore didn\u2019t stay long in Albany. He knew the fight to overcome the competition from Palmyra would always be ugly. Closer to the end of his career than the beginning, he didn\u2019t have the energy for it. But he knew someone who did, his 34-year-old<\/p>\n","protected":false},"author":1,"featured_media":36511,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55],"tags":[167,1985,247],"class_list":{"0":"post-36510","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-social-issues","8":"tag-making","9":"tag-monopoly","10":"tag-propublica"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/36510","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=36510"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/36510\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/36511"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36510"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36510"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36510"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}