Doctors Inc.

Last July, the staff at Northeast Portland's Physicians' Hospital did something hospitals don't typically do.

They called 911 to request medical assistance.

Most 911 calls come from people who want to be taken to a hospital. This call was from a hospital seeking to have a patient taken elsewhere.

"Hi, we need an ambulance at Physicians' Hospital," said receptionist Marj Wetzel.

A patient was suffering from cardiac arrest, Wetzel said, according to a tape of the conversation WW obtained through a public-records request.

"Male or female?" the operator asked.

"I don't know," Wetzel said.

"Age?"

"I don't know."

"Still breathing?"

"I'll have to transfer you," Wetzel said.

Wetzel placed the operator on hold for 64 seconds, but the 911 dispatcher had already sent paramedics to the hospital.

Ron Prinslow, who manages the state agency that regulates hospitals, says hospitals don't often call 911. "In my 19 years' experience, that would be an extremely rare event," Prinslow says.

"It's the first time I've heard of that happening in Portland," adds Dr. Donald Trunkey, the former head of surgery at Oregon Health & Science University Hospital.

Fire Bureau paramedics arrived five minutes after the July 27 call. Firefighters restarted the patient's heart and sped her to nearby Portland Adventist Hospital. But for Helen Florence Wilson, 88, who only minutes before had been laughing with her husband and son, help came too late.

"I knew Helen had been without oxygen for too long and she was already brain-dead," says her husband, Doyle Wilson, a retired construction executive.

Helen Wilson passed away five days later.

Shortly after her death, an investigator from Prinslow's agency, the state Health Care Licensure and Certification Program, issued a report based on a review of Wilson's medical records and interviews with the staff at Physicians' Hospital.

The report criticized the hospital and found that "the governing body failed to ensure that the medical staff was accountable for the quality of care provided to patients."

Physicians' Hospital has rules and regulations, but in Wilson's case, Prinslow says, the hospital "failed to enforce them."

Had the Wilson incident happened at any other hospital in Portland, Prinslow's report might have marked the end of the story.

After all, people die in hospitals every day. Sometimes those deaths are unavoidable, and sometimes they are related to errors or substandard care. But Wilson's death is causing concern in the medical community for several complex reasons.

For one, Physicians' Hospital is unique in Oregon: It is the only doctor-owned hospital in the state. Such facilities are controversial nationally and, until a recent federal moratorium, were growing explosively.

Some health-care experts say doctor-owned hospitals bring greater focus and efficiencies. Critics, however, say such hospitals can put profits before patients and create ethical dilemmas.

"You have a built-in conflict of interest when doctors refer patients to facilities in which they have ownership," says Trunkey.

Trunkey adds that Helen Wilson's age and medical history made any operation on her perilous. "Anytime you have a physician-owned hospital, you'd have to question the ethics of doing surgery on a high-risk patient at that facility," he says.

While it is still unclear just what went wrong in Helen Wilson's case, Trunkey and other critics say that doctor-owned hospitals challenge the traditional obligation caregivers have to put patients' interests first. Given the financial incentives such hospitals provide, critics ask, does it serve patients when doctors refer them to facilities they own?

On Dec. 23, 2004, the Portland Development Commission declared the opening of Physicians' Hospital at 10300 NE Hancock St. "Portland's Greatest Christmas Present Ever."

The low-slung, '60s-era brick building known as Woodland Park Hospital had long provided key emergency care and psychiatric services to outer Northeast Portland's hardscrabble Gateway district, where many residents lack health insurance.

"Woodland Park did a lot of important things, particularly the mental-health beds it offered," says Dr. John Santa, an OHSU professor and former head of the state's Office of Oregon Health Policy and Research.

"When that hospital closed, it really created a problem here because there's such a total lack of psychiatric space in Portland," says Jim Kronenberg of the Oregon Medical Association.

As important as emergency care and mental-health services may be to a community, however, both are often money-losers.

In 2003, Woodland Park, then owned by Symphony Healthcare, a for-profit Tennessee company, lost $4.4 million. On Jan. 14, 2004, Symphony closed Woodland Park. It closed Eastmoreland Hospital, the other facility it owned in Portland, two days later, and subsequently declared bankruptcy.

A group of four Portland doctors soon began negotiations to buy Woodland Park's assets, with help from the PDC (see sidebar, page 18).

One of those four founders is Jordi Kellogg, a neurosurgeon. Kellogg, 43, graduated from the University of Southern California Medical School in 1994 and completed his internship and residency at OHSU.

At about the same time he and his partners were preparing to open Physicians' Hospital, Kellogg was under investigation by the Oregon Board of Medical Examiners for issues that predated his role at Physicians'.

On Jan. 13, 2005, the board found Kellogg guilty of "unprofessional or dishonorable conduct" and "gross or repeated acts of negligence." (Kellogg did not respond to requests for an interview.)

According to the medical examiners board, Kellogg failed to follow up with a number of patients after surgery; often showed up late for surgery; and often failed to update dictated operative reports for weeks after operations, which "creates a lack of confidence in the accuracy of notations."

The board placed Kellogg on probation for 10 years, fined him $3,000, reprimanded him and ordered him to undergo regular monitoring. He did not contest the board's finding.

Told of Kellogg's punishment, the OMA's Kronenberg says, "What you're describing is a fairly serious breach of duties."

The Board of Medical Examiners disciplines relatively few of the nearly 11,000 doctors it oversees. Last year, it completed 471 investigations, according to Mike Sherman, the board's complaint resource officer, but handed out sanctions in only 35 cases.

Three weeks before the board disciplined Kellogg, Physicians' Hospital opened. But that opening was delayed because the hospital failed its initial state inspection. The inspectors' report contained 15 pages of deficiencies, and the accompanying letter said that Physicians' was not ready to open because of "the severity of some of the deficient areas (e.g., lack of sufficient patient care staffing, lack of patient care policies, and physical environment concerns).

"We have decided that Physicians Hospital is not in substantial compliance with the licensure rules," the letter concluded.

After correcting the deficiencies, the hospital was re-inspected three weeks later and got its license on Dec. 22, 2004.

Physicians' current CEO, Bill Houston (the fourth CEO in the hospital's 11-month history), acknowledges the hospital took shortcuts prior to the initial inspection.

"Is there a good excuse for the way they did it?" Houston asks rhetorically. "No. They took an easy route and got caught."

The staff was under time pressure to get a license. Under state law, a new hospital must not just pass an inspection—it must also show a demand for its services and obtain a "Certificate of Need" from the state before opening.

The law contains a loophole, however. When a hospital ceases operation as Woodland Park did, a new owner does not have to obtain a Certificate of Need if the facility reopens within 12 months—a deadline Physicians' met with just three weeks to spare.

There is some question about whether Physicians' could have gotten a certificate otherwise, given that the hospital is not providing services that are in short supply.

Physicians' is not operating an emergency room, for instance, making it one of only two such hospitals in Oregon. In addition, the hospital has decided not to reopen the 30 psychiatric beds Woodland Park offered. (It has only reopened 39 of the hospital's 200 beds so far.)

It is, in part, for this reason that local general hospitals were unhappy with the opening of Physicians'. Kent Ballantyne of the Oregon Association of Hospitals and Health Systems says his members, including Portland Providence and Portland Adventist, were concerned "about the loss of Woodland Park's emergency room.... Would all those patients now show up at their places?" (Officials from both hospitals declined comment.)

Physicians' CEO, Houston, says his hospital is currently focusing on two specialities—orthopedic surgery and neurosurgery. Both are far more lucrative than emergency and mental-health care.

Shortly after it opened, Physicians ran into problems.

On Feb. 14, according to a complaint filed with the state office of Radiation Protection Services, orthopedic surgeon Dr. Timothy Treible, one of Physicians' four founders and president of the hospital's board, ordered a nurse to operate a fluoroscope—a portable X-ray machine—for which she had no training. (Treible did not respond to requests for an interview.)

Under state rules, what Treible did is not allowed. "The use of fluoroscopic [portable X-ray] equipment by poorly trained or untrained individuals has resulted in serious radiation burn injuries to patients and therefore the Agency considers this a serious violation," wrote Robert Rapcinski, the Oregon Department of Human Services X-ray program manager, to the hospital.

A similar incident occurred in early May, according to state records, when Treible told another unlicensed staff member to operate a fluoroscope. "This second occurrence indicates that you have not yet addressed this serious issue," Rapcinski wrote on May 6.

The second violation is "particularly egregious," says Dr. Paul Brown, a professor of diagnostic radiology at OHSU, who was retained after the second incident to instruct Physicians' staff. "Once someone tells you what the rules are, you should know them."

A report by the state licensing agency investigator says qualified personnel were paged in both instances but Treible proceeded before they arrived. "Dr. Treible knows the rules, but he didn't want to wait," says Diane Birch, the hospital's former nursing director.

The event that has created the most attention in medical circles for Physicians' is Helen Wilson's death.

Last summer, Wilson's legs were bothering her. Aches and pains are part of getting older, but despite their ages, Wilson and her husband, Doyle, who recently turned 90, lived an active, independent life.

Helen cooked, played the piano and sewed, while Doyle battled weeds and unruly trees in their immaculate Vancouver, Wash., garden.

In June, Helen Wilson decided to have a lumbar laminectomy—a operation on her lower spine intended to decompress nerves leading to her legs.

Not many patients Wilson's age have such an operation. According to one large Oregon health insurer, only about 3 percent of the laminectomies it paid for in the past year were performed on people over 85. Part of the reason is the danger of anesthesia and pain medication. "The elderly can be extremely sensitive to narcotics," says OHSU's Trunkey.

Dr. Mark Metzger, the surgeon who operated on Helen Wilson, is a part owner of Physicians' Hospital, according to state records. (At least 32 investors now own shares in Physicians'.) Metzger also has operating privileges at Portland Adventist Hospital, says an Adventist spokesman.

It is unclear why Metzger chose to operate on Wilson at Physicians' rather than Adventist, which is a full-service hospital with an emergency room, a far larger staff and more sophisticated equipment. (Metzger did not return WW's phone calls.)

Helen Wilson was a Medicare patient. For a typical lumbar laminectomy, Medicare pays about $15,000, of which about $1,800 goes to the surgeon and $10,000 goes to the hospital. (The rest goes to the anesthesiologist and others who assist in the operation.)

Doctors who own hospitals are exempt from the Stark Act, a federal conflict-of-interest law that prohibits many other doctors from referring Medicare patients to facilities they own.

Although the Hippocratic oath requires that doctors not make medical decisions based on their wallets, Jean Mitchell, an economist at Georgetown University, says her research shows that hospital-owning physicians can be just as motivated by profit as other businesspeople.

"Insurance companies have cut physician fees dramatically in recent years," Mitchell says. "But facility fees are still high, and for some doctors, owning part of the facility is the way to make up the difference."

As a part-owner of Physicians', Metzger would have an economic incentive to send Wilson to Physicians', although there is no clear evidence that is why he did so.

On July 27, Doyle Wilson drove his wife to the hospital, where she was admitted at 8:30 am. "They told us it would be a minimal operation and she'd go home the next day," he says.

The two-hour surgery went smoothly, and by 4 pm, an investigator's report says, "Pain and blood pressure were well controlled and [Wilson] was moved to the inpatient medical surgical unit."

Wilson joked with her husband and ate ice chips from a spoon held by her son, Mike. "She said, 'I'm all right as long as I don't move,'" recalls Mike Wilson, who is the pastor at Sellwood Baptist Church.

Although Wilson was doing fine, the investigator's report says that the nurses on duty lacked instructions for her care.

"Documentation...reflected multiple unsuccessful calls to several physicians between the hours of 1655 and 1720 on 7/27/05 in an attempt to obtain physician orders for [Wilson's] routine medications," the report states.

At 5:15 pm, the report says, a nurse gave Wilson a shot of hydromorphone, a narcotic painkiller also known as Dilaudid. Although the investigator's report says Wilson "complained of pain," Wilson's husband and son disagree. "She neither wanted or needed the shot, and the nurse didn't ask," Mike Wilson says.

Helen Wilson's eyes closed almost immediately, her son says. She soon made a gasping noise. "I put my hand on her neck to feel for a pulse and there wasn't one," Mike Wilson says. "I yelled, 'Somebody get in here, fast.'"

It was not yet 6 pm. There was no doctor in the hospital. Oregon law does not require that a doctor be on the premises of a hospital that lacks an emergency room. But some observers—including Physicians' current CEO—find it troubling that a hospital specializing in orthopedic surgery and neurosurgery would fail to have a doctor on hand for post-surgical follow-up.

"That really bothers me," says Houston, who started at the hospital Aug. 19, replacing interim CEO Heide Smith. "We're going to fix that."

From the point Helen Wilson stopped breathing, the version of events given by the hospital staff to an investigator deviates dramatically from Doyle and Mike Wilson's accounts.

According to the hospital, the nurses followed procedure. "The hospital's Code 99 [cardiac arrest] committee reviewed the incident on 08/03/05," the investigator's report says. "The committee determined that staff followed the established Code 99 policy."

Mike Wilson, however, says chaos reigned. The nurse who was trying to resuscitate Helen Wilson could not get air into her. "She had not cleared the airway, and air was rushing right back out into the mask," Wilson says.

When another nurse brought the "crash-cart," which contains a defibrillator, Wilson claims, they could not find the cloth patches that are supposed to be attached to the patient's skin. "They didn't have what they needed, and they weren't working together," he says. "It was like a Three Stooges comedy routine."

(Houston declined to comment on specifics of Wilson's case, citing patient confidentiality concerns.)

After paramedics arrived, they restarted Wilson's heart and put her in an ambulance to Portland Adventist Hospital, where doctors placed Wilson on life support. On July 31, her family decided to unplug the machine, and 24 hours later, Wilson died.

Although she found many deficiencies in care, Prinslow's investigator did not blame Physicians' for Wilson's death, saying the hospital followed procedure by calling 911 and that the "provision of nursing services was appropriate."

The investigator had enough concerns, however, that Prinslow forwarded her findings to the Board of Medical Examiners, which, unlike Prinslow's agency, regulates doctors. The board has subpoenaed Physicians' records relating to Wilson, Houston says.

Houston expresses regret for what he terms an "unfortunate incident" but says the hospital has determined that no matter what the nurses did, it "wouldn't have made any difference to the outcome."

Doyle and Mike Wilson disagree. They say an unnecessary shot of narcotic caused respiratory and cardiac arrest, which the nurses botched. They are preparing to sue.

Informed of Helen Wilson's age, medical history and the events that preceded her death, Trunkey, the former OHSU surgery chief, says, "From what you've told me, this did not meet the standard of care."

No matter what happened after the surgery, Trunkey says, Physicians' had no business admitting Wilson for surgery in the first place, given the risks presented by her age, high blood pressure and history of previous open-heart surgery. "This woman should never have been operated on in that facility," Trunkey says.

As the medical examiners board conducts its investigation into the circumstances surrounding Helen Wilson's death, Congress is debating whether to allow any more doctor-owned hospitals.

Nationally, general hospitals (such those operated locally by Providence and Legacy) have bitterly opposed such facilities, which grew explosively (see chart) from 1990 until November 2003. That's when Congress imposed a moratorium on new hospitals like Physicians'. (It is unclear why the moratorium did not apply to Physicians'.) The moratorium came as a response to the concerns expressed by experts like Mitchell, the Georgetown economist, who has compared doctor-owned hospitals and competing community hospitals in Arizona and Oklahoma.

Mitchell says her findings were consistent in both states: When doctors acquire hospitals, the number of surgical and outpatient procedures done per capita increase. "Financial incentives affect behavior," Mitchell says. "The numbers are the numbers."

show me the money

When the four doctors who bought Woodland Park Hospital approached the Portland Development Commission in 2004 to help finance the purchase, they had a compelling story to tell about for-profit medicine.

They would restore a couple of hundred badly needed jobs to the depressed Gateway neighborhood and provide critical medical services. Their projections of eye-popping profits didn't hurt their chances of getting a loan.

For 2005, according to numbers they gave PDC and which WW obtained through a public-records request, Physicians' owners expected about $35 million in revenues and more than $10 million in pre-tax profits.

PDC was impressed enough to loan the doctors $500,000 at 3 percent interest over five years—and before doling out the loan even advanced them money to buy items such as paint, light bulbs and gutters.

Physicians' projections proved overly optimistic. "Those numbers were absolutely ridiculous," says Bill Houston, the hospital's new CEO.

The hospital has lost money since it opened, Houston says, because of excessive overhead, unfavorable insurance contracts and expensive loans.

The hospital has slashed staffing from more than 200 to about 90, Houston says, and is consolidating its debts. "After we refinance, I'm projecting we can make $2 million next year," he adds. —NJ

Earlier this year,

noted, "Physicians are attracted to investing and practicing in specialty hospitals for two main reasons: to directly control hospital operations in relation to patient care and to augment their incomes."

Dr. Werner Meier, the anesthesiologist who treated Helen Wilson in July, was reprimanded by the state Board of Medical Examiners in 1990 for "unprofessional conduct" during surgery.

According to medical records, when Helen Wilson arrived at Physicians' Hospital, it had been 37 days since she last saw her surgeon. Investigators found her chart "lacked documentation the procedure was still necessary."

The only two complaints about the misuse of portable X-ray devices the state has received in the past two years concerned Physicians' Hospital.

Aside from Physicians', there are only two other for-profit hospitals in Oregon: McKenzie-Willamette in Springfield and Willamette Valley in McMinnville.

Research by the federal Government Accountability Office shows that physician-owned hospitals typically treat less severely ill patients. Since Medicare pays a flat rate regardless of the severity of illness, such patients are more profitable.

In addition to Drs. Jordi Kellogg and Timothy Treible, the other two principal owners of Physicians' are Bryce Milam, a chiropractor, and Carlos Ceballos, an anesthesiologist. All four personally guaranteed the PDC loan.

WWeek 2015