BusinessTN

Jim Moss has forged an empire. Since assuming the helm in 1986 of the then 579-bed Jackson-Madison County General Hospital, Moss has expanded the West Tennessee Healthcare system to include the 53-year-old flagship hospital and five satellite hospitals, providing 1,147 beds system-wide. Since 1982, revenue has grown from about $44 million to a projected $900 million this year.

As the undefeated champion of health care in Jackson and the surrounding counties, Moss has faced his fair share of challengers. Over the past two decades, many have fought West Tennessee Healthcare and its controversial leader—including giant hospital chain HCA—all seeking a piece of the increasingly lucrative pie. Physicians and competitors have contested Moss with lawsuits aimed squarely at his health care empire, calling it a monopoly that unfairly squeezes out competition. He’s even caught the eye of Attorney General Paul Summers, who intervened after suspecting cooperation between Jackson General and a local radiology group was jacking up patient costs. Still, by all accounts, Moss has emerged from every fight unscathed, his system undiminished.

But that hasn’t stopped the latest contender from entering the ring. Last year, Brentwood-based Community Health Systems bought seven hospitals in West Tennessee from Methodist Healthcare of Memphis. One of those hospitals happened to be the 26-year-old Regional Hospital of Jackson, a 154-bed would-be rival of Jackson General (itself a 662-bed facility undergoing a $90 million expansion).

Community Health has come out swinging, challenging Moss’ West Tennessee Healthcare in a lawsuit alleging anti-competitive activity by his system. At the same time, Community Health has taken up Regional Hospital’s ongoing battle for a certificate of need (CON) to re-start its open-heart surgery program, a service that West Tennessee Healthcare officials have said unnecessarily duplicates a similar program at Jackson General.

“There are two excellent hospitals in Jackson,” says Tim Puthoff, CEO of Regional Hospital, “and people should be able to choose between them.”

In most other markets around the country, Puthoff says, competition in health care is being encouraged, and patients are given a choice of hospitals through their insurers. “Jackson seems to be the exception to what appears to be a nationwide trend towards choice.”

As Community Health knows well, all roads to practicing health care in Jackson and rural West Tennessee lead through Jim Moss. A native of New Iberia, La., Moss seems to have been grooming himself from the start to be a hospital chief. In 1970, after being discharged from his Air Force duties in Vietnam, Moss studied business administration as an undergraduate and earned a masters degree in hospital and health administration from the University of Alabama at Birmingham.

Moss held management positions at hospitals in Montgomery, Ala., and Lake Charles, La., before joining Jackson General as an assistant administrator in 1981. Five years later, Moss became president and chief executive of West Tennessee Healthcare.

Since taking the helm, Moss has steadfastly adhered to the belief that in order to deepen the hospital’s commitment to the community—which includes the indigent—one must grow the business through economies of scale.

Moss has succeeded in expanding the health care system even as its revenues from commercial insurers—traditionally the industry’s main source of nourishment—have fallen from 42% in 1982 to 28% today.

“That’s why we compete so aggressively for the commercial [segment],” Moss says. As with other health care providers, the commercial portion is generally the only way for Jackson General to make a profit and grow the business, he contends. (The hospital’s other business is with Medicare and TennCare patients—and through the indigent care it provides.)

Sammie Arnold, a pharmacist and chairman of the nonprofit’s five-member board of trustees, has been impressed by Moss’s leadership. He says the CEO is primarily driven by his desire to be the best.

“He’s not satisfied with being in the top 50th, 10th or 5th percentile of anything,” Arnold says, adding that Moss is a “true visionary” in health care.

But Moss’s detractors have a few problems with his vision. In an industry with its share of big personalities, Moss has drawn plenty of scrutiny and criticism as he has grown West Tennessee Healthcare. He’s been called un-American, arrogant and an iron-fisted ruler. Less personal but of more consequence, there are some who consider Moss’s system a violation of federal antitrust laws.

That some would hold such a view is understandable. After all, Moss wields the not-for-profit’s financial might to great effect. For example, West Tennessee Healthcare has purchased most of the property surrounding Regional Hospital, leaving the Community Health facility “virtually landlocked,” though Moss denies that this is part of his strategy.

Still, it’s not hard to find fans of West Tennessee Healthcare and its CEO throughout the region. The system is revered as one of the area’s largest employers, and when patients and their families come to Jackson General for health care, the local economy benefits. As for Moss, many people in West Tennessee view him as a savior who rescued struggling rural hospitals by folding them into the Jackson-based system.

According to Jan Boud, public relations director for West Tennessee Healthcare, Moss’s system helped hospitals in Bolivar, Camden, Trenton, Humboldt and Milan with financial support, and it continues to save them money through the purchasing power of contract buying.

Jess Pritchard, former mayor of Humboldt, says in the late ’80s, when he was mayor and learned the hospital there was on the verge of closing down, he consulted Humboldt’s Board of Aldermen and the Chamber of Commerce before deciding to contact Jackson General for help.

“We contacted them, and they were quick to respond,” Pritchard says. “They’ve increased and improved the facilities. We appreciate the fact that they’re here.”

For Moss, it’s a simple equation: growth and revenue for his system equal better care for the people of West Tennessee. In his fight for dollars, Moss has thrown many punches over the years, and though he claims to welcome competition, Moss has a virtual stranglehold on the region.

For example, West Tennessee Healthcare has signed exclusive agreements with insurers BlueCross BlueShield of Tennessee, Aetna, UnitedHealthcare and others. This exclusivity shuts out Jackson’s Regional Hospital, for which actual business from commercial insurance is very small. But what some see as unfair advantage, Moss considers merely the fruit of long labor.

“We’ve been here 50 years, and we’ve earned our position in this marketplace,” Moss says. “We’re not precluding anybody else from coming in and competing for the business with the insurance companies.”

Based on court filings, it would seem Regional Hospital disagrees. The hospital’s owner, Community Health Systems, has taken legal action against West Tennessee Healthcare and BlueCross, arguing the defendants have violated U.S. antitrust law and state laws.

Patients should have real choice over which hospitals and physicians provide treatment to them, Regional Hospital contends, adding, “West Tennessee Healthcare’s long-term exclusive contracts with BlueCross alone substantially foreclose competition.” About 80% of potential patients in the relevant market are covered by BlueCross, Regional Hospital estimates.

According to court filings, Moss expressed his view of competition in 1996 in a letter to the head of Methodist Health Systems, which at that time operated several rural hospitals in West Tennessee. Moss wrote that West Tennessee Healthcare would be open to buying, leasing, managing or affiliating with the hospitals—but not maintaining a competitive relationship.

Moss said in the letter, “We believe that mutually advantageous relationships among providers, as opposed to duplicative, competitive efforts, hold more and better promise for the future.”

As such, Jackson General offers little room for another Jackson facility to survive without duplicating services. Major burn treatment and organ transplants are the only services not offered by Jackson General that might send a rural West Tennessean to Memphis or Nashville instead.

From Moss’ point of view, West Tennessee Healthcare’s competition consists of major tertiary facilities in Memphis and Nashville. He adds that 67% of Jackson General’s business comes from outside Madison County.

But Regional Hospital wants more business in the market and is fighting to level the playing field. In its case against West Tennessee Healthcare and BlueCross, Regional Hospital presents a 1999 letter from BlueCross’ Vicky Gregg, who is now chief executive of the insurer. The correspondence says BlueCross was “in agreement that markets like Jackson need competition and that exclusive services controlled by a hospital system in any given geographic area can work to the detriment of residents in that community.”

When contacted in December, Gregg declined to comment, saying that because it is a legal matter, BlueCross’s court filings must speak for themselves.

Despite Gregg’s earlier written sentiment, BlueCross now has an exclusive agreement with West Tennessee Healthcare and has argued to dismiss Regional’s complaint. BlueCross contends that state action immunity statutes keep West Tennessee Healthcare, a creation of the legislature, and BlueCross, a contractor, immune from federal antitrust laws due to the system’s status as a private act hospital.

While West Tennessee Healthcare’s strong market position stems from a number of factors—shrewd management, patient satisfaction and well-tended community relations—its antitrust immunity undeniably plays a major role in allowing the system to fend off newcomers. Thus, it’s not surprising that West Tennessee Healthcare’s antitrust exemption has become the focus of efforts to challenge its supremacy.

The state office of the attorney general says in a recent friend-of-the court brief, filed as part of Community Health’s lawsuit, that Jackson General, as a private act hospital, is in fact not immune from liability under federal antitrust laws. Also, the State of Tennessee mandates competition among public and private hospitals, Attorney General Paul Summers says.

Health care mergers and acquisitions attorney George Bishop, chairman of law firm Waller Lansden Dortch & Davis in Nashville, says while the attorney general’s brief technically does not carry any more weight in the case than another party’s brief, the attorney general’s office is highly respected and considered well-informed. (Bishop represented HCA years ago when it leased Regional Hospital to Methodist Healthcare, but he is not involved with current litigation involving the Jackson hospitals.)

Community Health hopes the presiding judge will dismiss the immunity pleas. Such a dismissal could lead ultimately to the voiding of those West Tennessee Healthcare contracts found to violate antitrust laws, which would present a serious challenge for Moss’ health care system. Without exclusive agreements with insurers, patient volume could be compromised, thereby stunting the system’s growth.

Furthermore, Bishop thinks that if West Tennessee Healthcare is deemed in violation of antitrust laws, it is possible that other litigants might feel encouraged to come forward with antitrust claims against the health care system, newly reassured that their cases would not just be thrown out. However, Bishop says it’s very difficult to prove that antitrust laws have been violated. In the health care industry, defendants generally win in those kinds of cases, he says.

For his part, Moss maintains that the traditional economic model—in which competition is shown to lower prices and encourage innovation—does not exist in health care. He points out that in the traditional model, the user, buyer and payer are the same. This is not the case in health care: the patient is the user, the buyer is the physician, and the payer is a third party. Thus, there is no such thing as price sensitivity to drive up use and drive down costs, he says.

Regional Hospital’s Puthoff disagrees. “I don’t think health care is immune from the benefits of a competitive marketplace,” he says.

In fact, academic studies regularly conclude that such restraints on competition are harmful, even as most incumbent health care providers try to persuade otherwise. Michael Morrisey, director of the Lister Hill Center for Health Policy at the University of Alabama, points out that hospitals routinely turn to government to “cartelize” their industry and keep prices and profits higher than competitive levels. Even more pedestrian experts—readers of practically any daily newspaper in the country—have followed recent pricing battles between hospitals and insurers and surely would scoff at the notion that competition in their local hospital market wasn’t a key factor in determining their insurance premiums.

As if to prove Morrisey’s point, Jackson General and Regional Hospital have fought each other for years over a certificate of need (CON) for Regional Hospital’s open-heart surgery program. Figures for 2001-2002 show Jackson General performed 654 surgeries to Regional Hospital’s 121. The lucrative program, which makes up approximately 20% of Regional Hospital’s patient volume, has started and stopped, and at time of publication, the state agency responsible for granting CONs was in the process of considering how to proceed with Regional Hospital’s application. The intermittent limbo meant Regional was forced to release 35 employees involved in the program this past December.

Rosemary Walsh, spokesperson for Regional Hospital’s parent Community Health, says, “We will vigorously fight to pursue all options to keep the open-heart program. We are seeking every legal remedy possible.”

Community Health has a lot riding on the CON and on its lawsuit against BlueCross and West Tennessee Healthcare. The Jackson facility has been called the most significant of the seven hospitals Community Health purchased from Methodist. If Regional Hospital remains unable to tap BlueCross’ membership or offer open-heart procedures, the return on Community Health’s investment appears rather limited.

Meanwhile, though more rounds remain in the current bout with Community Health, Moss remains undefeated and makes no apologies for his success, or his system’s lock on the competition. Even should his hospital system’s antitrust immunity be breached, would-be contenders might want to think twice before stepping into the ring with Moss. This heavyweight champion won’t relinquish his belt without a fight, and chances are, he will already have landed a few punches before the bell rings.