The Baylor/Methodist Saga, Part 2 of 3 - The real heartbreaker: money

Part 2/3

HoustonChronicle.com - The real heartbreaker: money

HoustonChronicle.com

Feb. 21, 2005, 10:59AM

The real heartbreaker: money
Ambitions drove a wedge between Baylor, Methodist
Editor's note: The demands of managed care in the '80s and '90s wrought fissures in the historic relationship between Baylor College of Medicine and The Methodist Hospital. Strong leaders and divergent visions left little room for compromise.
By TODD ACKERMAN
Copyright 2005 Houston Chronicle

The rift that would tear apart Baylor College of Medicine and The Methodist Hospital began with differing visions and soon became all but visible.


As Baylor's commitment to basic research exploded, Methodist went outside academia to purchase new private practices and opened a main facility with a lobby featuring soaring palm trees and a vaulted skylight.

The situation, one doctor said, was analogous to a long-married husband or wife getting a tummy tuck and face-lift, then seeking new suitors.

"The spouse asks, 'What happened to our love affair?' " said Dr. Kenneth Maddox, Chief of Staff at Ben Taub Hospital and a full-time Baylor faculty member. "The other responds, 'It's still on. You can have Thursday afternoon.' "

What happened to the Baylor-Methodist love affair was managed care. It arrived in the mid-'80s, hitting teaching hospitals the hardest because their expenses are 25 percent to 30 percent greater than community hospitals.

Reimbursed less by government or private insurers, most cut back on what wasn't cost-effective. Not atypically, that involved their medical school.

"Doing well rather than doing good became the end in itself," writes Kenneth Ludmerer in Time to Heal: American Medical from the Turn of the Century to the Era of Managed Care. "Even leading teaching hospitals often seemed preoccuppied with market domination and profitability rather than academic work and the quality of patient care."

The way Baylor saw it, Methodist was becoming less an academic hospital and more a swank community hospital, focused on the bottom line, only interested in research if it meant a quick return.

If so, the strategy worked for Methodist. While hospitals in the Eastern United States foundered, Methodist built a war chest, thanks to extraordinary business prowess and investment decisions. In the '90s, it became one of the richest hospitals in the country. Today, its reserves top $2 billion.

Meanwhile, Baylor was still dependent on private donations or, as one observer put it, the kindness of strangers. Methodist's reputation was built on Baylor doctors, but the college was seeing little of the profits, which became all the more grating to faculty in 1989, when the hospital opened the John S. Dunn Tower, the building with the opulent lobby.

Methodist's private doctors, accounting for three-quarters of the hospital's revenue, said Baylor should be more grateful. Without Methodist's support — about $50 million a year, according to the hospital — the school might have gone bankrupt, they said.

The love affair had become a marriage of convenience.

But Methodist's charms were seductive to many Baylor doctors. Between 1995 and 2003, 134 Baylor faculty members left the college's employ for private practice, most at Methodist, where they could make significantly more money. Baylor's adult clinical programs deteriorated.

In 2002, when Baylor began searching for a president to succeed Dr. Ralph Feigin, its priority was finding someone who could build up the college's adult clinical programs. An analysis showed Baylor research and education ranked in the top tier of medical schools, but the revenue it generated from adult clinical practices was 50 percent less than its peers.

In 2003, Baylor settled on Dr. Peter Traber, an outsider and drug company executive who before that was briefly CEO of the University of Pennsylvania Health System. Baylor wanted him so badly it gave him a $1 million signing bonus.

Traber, 48, brought a different style to Baylor.

Whereas his two predecessors were quiet and circumspect, he is expansive, brash, happy to butt heads. The style has endeared him to some, alienated him from others.

"There are a number of ways to do things," Traber told the Chronicle in 2003. "One is to know what to do and never do it. I'm the other kind: knows what to do and can't resist doing it. I have no problems shaking things up."

Four months after arriving in Houston, Traber did just that, announcing that Baylor wanted to build its own one-stop outpatient clinic, which would offer the full spectrum of adult care except hospitalization. The clinic would give Baylor what it never had — profits from diagnostic and other tests that make hospitals their big money.

Methodist hated the idea. Happy with the arrangement the way it was, its officials argued that such a clinic would duplicate what it did better and put the hospital in competition with its affiliate. They also argued it would strain relations with private doctors, who historically traded patient referrals with Baylor faculty.

The disagreement came at a crucial time. The partnership's contract was scheduled to expire in the spring of 2004. If they wanted an extension, the two institutions were going to have to resolve their differences.

Negotiations extended over the next eight months, halting first while Methodist studied the idea and later while Baylor entered into talks with St. Luke's Episcopal Hospital, with which the college already had a limited partnership. People close to the negotiations said it was a different Baylor in the negotiations, no longer the submissive partner it had been historically, no longer intimidated by Methodist's cash flow.

Some attributed the Baylor swagger to its new leadership, Traber and Corbin "Corby" Robertson Jr., now the board chairman. Both are former football stars — Traber was an all-state high school tight end who played at the University of Michigan until a neck injury ended his career; Robertson was an All-America linebacker for Darrell Royal's University of Texas Longhorns.

Actually, a group of 150 Baylor faculty, administrative and trustee leaders agreed on the clinic plan before Traber's announcement.

Baylor's problem was the negotiator at the other end of the table: John Bookout, now the Methodist board chairman. Bookout had piloted a B-17 bomber over wartime Europe, so he wasn't about to be intimidated by a couple of former football players a generation younger than he. He told Robertson and Traber that Methodist would build Baylor a clinic but the hospital would run it.

That wasn't what Baylor wanted to hear. It negotiated a deal with St. Luke's — one that included its own clinic — then resumed talks with Methodist.

Methodist proposed more financial support, including a bonus of up to $7 million if Baylor improved the hospital's U.S. News & World Report rankings. But Baylor thought the offer was mostly smoke and mirrors, and the philosophical differences remained.

Still, in the final weeks, the scuttlebutt was that Baylor and Methodist had worked it out. Bookout called colleagues and told them he thought they had a deal. Baylor-Methodist loyalists celebrated.

But no one knew of any deal at Baylor. On April 21, 2004, the day the college's board met to vote on the competing proposals from Methodist and St. Luke's, the college's public affairs office had two news releases ready — one that Baylor would affiliate with Methodist, the other that it would affiliate with St. Luke's.