Johns Hopkins brought Sibley into its system in November 2010 as a wholly owned subsidiary. “There’s only so much Hopkins could do in the Baltimore market,” David Catania says. “It is a great brand, but it had to expand. It had to come where the money is.”
Sibley is located in one of the city’s most elite neighborhoods and serves many wealthy patients who come with private insurance. It sits on acres of valuable property for expansion. It offers strong specialty services in cancer treatment, obstetrics, and orthopedics. Hopkins also benefits from Sibley’s foundation and its endowment of $44 million.
In June, Hopkins broke ground on the “new Sibley.” The $243-million project will add a new emergency department, a new cancer center, and 18 labor and delivery suites. Its centerpiece will be 200 private patient rooms that fit the profile of luxury suites.
Sibley’s hardly alone: Many hospitals in the area and across the country have added luxury suites to attract high-end patients and the revenue they bring. MedStar’s Washington Hospital Center has a VIP wing with soundproof suites, private chefs, china and crystal table settings, and sofa-beds for family members.
Likewise, Sibley’s application to build a massive proton-therapy facility was a move to muscle into the potentially lucrative cancer-treatment market. It proposed four so-called vaults at a cost of $129 million. As of this past spring, there were only 11 working proton treatment centers in the US—though 17 were under construction, including one near Baltimore.
In its application to DC’s State Health Planning and Development Agency (SHPDA), which must approve any hospital expansion, Sibley projected hefty revenues from the proton-therapy facility, scheduled to open in 2017. If approved, it would generate a $9.3-million profit by 2018. The next year, Sibley expects it to generate $15 million in profits; that would represent nearly 80 percent of its anticipated profit of $21 million.
MedStar saw Sibley’s potential profits cutting into its cancer-treatment market.
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In 2000, Georgetown University Hospital was “going broke, essentially,” says president Richard Goldberg, who’s been with the hospital 45 years. MedStar bought the hospital and invested millions in the facility, doctors and nurses, and specialties such as gastroenterology and neurosurgery. “We’ve gone from deficits to a healthy surplus,” Goldberg says. “It’s been a tremendous advantage.”
MedStar, headquartered in Columbia, is the largest nonprofit health-care system in the Mid-Atlantic. It controls hospitals and outpatient facilities stretching into southern Maryland—and it’s been known to protect its market share aggressively.
In 2012, George Washington University Hospital applied for a certificate of need to reestablish its kidney-and-pancreas transplant program. MedStar controlled the market and opposed GW before the State Health Planning and Development Agency, arguing that its monopoly served the public interest because it controlled costs and produced successful outcomes. The problem, MedStar maintained, was the lack of organs rather than operating rooms.
The agency denied GW’s request and preserved MedStar’s monopoly. MedStar hoped for the same outcome when it challenged Sibley’s proton-therapy project.
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MedStar first publicly signaled its opposition to Sibley’s proton project at a public hearing on January 8 of this year. Regina Knox Woods, head of MedStar’s government affairs in DC, suggested that the health-care planning agency make its decision “not based on the interests of a particular business wanting to increase market share” but rather the needs of District residents. The “business” was Hopkins.
For the next five months, as SHPDA weighed testimony and assessed documents, MedStar attacked Sibley in public and private. In written responses to hearing testimony, it called Sibley’s proposal “operationally and financially infeasible,” questioning the “true ownership structure” of the proton-therapy center and challenging Sibley’s commitment to working with underserved communities in need of cancer treatment.
To blunt the criticism, Sibley had approached Howard University Hospital and United Medical Center in the District’s Ward 8 to collaborate in cancer care, screening, and research—and, when necessary, to bus patients to Sibley for treatment. Top officials from both Howard and UMC extolled the collaboration before a DC Council committee.
But in written responses, MedStar derided Sibley’s “collaborations” and called them “much ado about nothing.” In one broadside, it referred to Sibley’s partnerships as “a cynical strategy belied by the facts” and its track record in working with DC’s poor as “woeful.”
The conflict took on a personal tone at least once. A number of council members sent letters of support to SHPDA for proton projects by both Sibley and MedStar. But when the Federal City Council sent a similar letter of dual support, MedStar CEO Ken Samet took Federal City Council executive director Anthony Williams and chairman Robert Flanagan aside to register his displeasure at their support for Sibley and Hopkins, according to sources.
Sibley blasted back, accusing MedStar of inventing facts “to deceive and misinform” and of “manic manipulations of data.” In a February 8 response, Sibley called MedStar’s attacks “a blatant attempt to engage in anti-competitive behavior and deprive Washington, D.C., of a valuable competitor.”
In its filing, MedStar suggested that Sibley had created a “phantom” entity to finance its proton project. Sibley countered with a detailed description of its funding sources. It accused MedStar of “lack of integrity” and said “the perversion of facts is so pervasive that it raises the question of whether [MedStar Georgetown University Hospital’s] petition reveals fraudulent purposes.”
MedStar and Sibley traded accusations and charges into the spring.
“What is good business for Johns Hopkins is not necessarily good or wise health care for the DC metropolitan region’s residents,” MedStar wrote on March 8.
Sibley countered on April 16: “MedStar’s opposition to Sibley’s [certificate of need] remains grounded in fear of competition if world class health care services are available in the District.”
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On May 31, SHPDA approved Georgetown’s proton-therapy facility and granted a certificate of need to two of Sibley’s four proposed proton-therapy vaults. Its lengthy report discounted MedStar’s attacks and concluded: “Although it can be argued that as a free standing community hospital, Sibley would not have had the infrastructure to establish proton therapy, with the involvement and commitment of Johns Hopkins, the proposed project is a viable program.”
When I ask Georgetown Hospital president Richard Goldberg about MedStar’s opposition to Sibley’s proton project, he downplays the conflict, calling the SHPDA review “a great forum for healthy discussion.”
Does MedStar fear Hopkins’s arrival on the local market? “No,” says M. Joy Drass, executive vice president for MedStar’s operations in the Washington region. “They are a nationally recognized health-care provider. We will make each other better.”
Both Sibley and Hopkins declined to discuss the proton project.
Meanwhile, Children’s National Health System has agreed to collaborate with Sibley to establish a pediatric cancer-treatment program. SHPDA had turned down one of Sibley’s four proposed proton vaults because the hospital lacked a pediatric program. With Children’s on its team, it has reapplied for the third proton-therapy room.
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Given the current round of consolidation and competition, can Washingtonians expect better health care? “People benefit from more competition, not less,” the DC Council’s David Catania says. “I want health-care providers competing to serve our residents. The benefits are just starting.”
Where it makes financial sense, we’re also likely to see more collaborations such as the one between Children’s and Sibley. This fall, Children’s and Inova are opening a joint facility called Pediatric Specialists of Virginia, in Fairfax and Falls Church.
“We were looking at expanding our pediatric care to compete with Inova,” Children’s CEO Kurt Newman says. “Maybe we should take a different approach, we thought, from competition and an arms race to try and out-do Inova. Why not cooperate?”
MedStar’s Washington Hospital Center took a similar tack when it formed an alliance with the Cleveland Clinic, which has one of the nation’s best cardiac programs. The two will collaborate to share patients and bring the latest medical innovations to market.
“The business model for Cleveland Clinic is they will offload volume,” Washington Hospital Center president John Sullivan says. “We will end up with better outcomes and patient flow.”
One benefit you’re not likely to see is long hospital stays. “You’re always going to need hospitals,” says Rob Hartmann, head of marketing for National Rehabilitation Network. “But we have to reduce health-care expenses and costs. That means moving everything out of the hospital that’s not essential to that environment.”
Industry leaders predict that’s the model we’re heading toward. “The hospital is the hub with spokes into the community,” says George Washington University Hospital CEO Barry Wolfman.
Regardless of whether they offer care in hospitals, outpatient centers, or doctors’ offices, health-care providers will have to compete for patients and their loyalty—which likely means better services, better facilities, better technology.
Strategic Health Care’s Paul Lee sees access to data tipping power toward the patient, too: “The government is demanding that health-care providers make more information available to consumers. For the first time, patients are able to compare hospitals and nursing homes and make decisions based on quality.”
In a few years, they can compare Sibley and Georgetown for the best proton-therapy facilities.
This article appears in the October 2013 issue of The Washingtonian.