By JIM HALL/The Free Lance-Star

The competition to build two new hospitals in the Fredericksburg area pits very different hospital companies.

One is a corporate giant, an international chain with billions in annual revenues and profits.

The other is also successful but on a smaller scale, a traditional community hospital facing one of the greatest challenges in its history.

HCA Health Services of Virginia and MediCorp Health System differ in size, reach and mission. In certain key ways, they also differ in the way they operate their hospitals.

Based in Nashville, Tenn., HCA is one of the nation's largest hospital chains, with 190 hospitals and 90 surgery centers. In Virginia, it is the fourth-largest private employer, with 11 acute-care hospitals, including two of the state's largest and most profitable: CJW Medical Center and Henrico Doctors' Hospital, both in Richmond.

HCA represents a minority form of hospital ownership in the United States, the proprietary or for-profit hospital.

Most of America's hospitals--at least 83 percent--are organized like MediCorp and Mary Washington Hospital. They are community hospitals, or not-for-profits. Many have served their regions for decades, often as sole providers.

Their not-for-profit status doesn't mean that they don't make money. Generally, they do, and reinvest those profits in services and equipment. They pay no local, state or federal taxes in exchange for agreeing to treat everyone.

That difference in mission can show up at the bottom line. Mary Washington, with 412 beds, had profits of about $8.6 million in 2004, according to Virginia Health Information, a Richmond nonprofit that collects state health data.

CJW Medical Center with 758 beds made nearly $70 million during the same period. Henrico Doctors' with 540 beds made more than $50 million.

"Clearly we know how to run hospitals efficiently. That's in everyone's best interest," said Mark A. Foust, vice president for marketing for HCA's Central Atlantic Division.

Both MediCorp and HCA seek to tap the Fredericksburg area's explosive suburban growth and increasing percentage of persons 65 and older. To do this, they have filed permit applications for new hospitals with the state Health Department.

MediCorp has proposed a 100-bed hospital in Stafford County near the courthouse. HCA has chosen the Massaponax area of Spotsylvania County. It has proposed a facility of up to 130 beds, which would be the smallest of its Virginia hospitals.

The 2005 Industry Report from the health information group reveals some similarities in the way the two companies do business. For example, both operate their hospitals at an occupancy rate of about 65 percent, slightly higher than the state average.

But there are many differences. MediCorp spends more per patient on new plant and equipment than the typical HCA hospital in Virginia.

Patients tend to stay longer at an HCA hospital--about a half-day--even after adjusting for the severity of their illnesses.

HCA hospitals in Virginia tend to be profitable and to have higher profit margins than Mary Washington. Henrico Doctors' and CJW Medical Center had profit margins of more than 13 percent. Mary Washington had a profit margin of almost 3 percent.

One way HCA earns this profit is by keeping its labor costs low. Its hospitals employ fewer workers per patient than Mary Washington. The typical HCA hospital in Virginia spends about $517 per patient less in labor costs.

HCA hospitals in Virginia also charge more for their services, according to the health information group.

The group tracks hospital "charges," or list prices, for 35 broad groups of treatment, or "service lines." In 2004, HCA hospitals had higher charges than Mary Washington's for 24 of 35 service lines.

For example, Henrico Doctors' Hospital charged $30,205 for a typical cancer treatment. At Mary Washington Hospital, the same treatment was $20,029.

But the charge data are controversial. Some argue that these list prices are important, especially to the uninsured, but others see it as the relic of another time.

"Take a look at HCA's charge structure. Theirs is a lot higher than ours," said Fred M. Rankin III, MediCorp's president and chief executive officer.

"Charges are really meaningless," counters Foust. "It's a dinosaur of a statistic."

Foust said health-insurance plans demand and receive discount prices from HCA and all other hospital companies. Even uninsured patients can receive free or discounted care, he said, under HCA's charity-care programs.

"No one pays charges," Foust said.

Hospital companies don't generally publish their real prices and are not required to report them to the state, said Michael T. Lundberg, executive director of Virginia Health Information.

"We have no other tool available than charges to judge hospital prices for specific conditions or surgeries," Lundberg said.

Even with these differences in the way HCA and MediCorp operate their hospitals, a new facility, no matter who owns it, will mean more jobs, improved health care and greater choice for area residents.

As HCA points out in its application, the region is the fastest growing and most populous in Virginia with only one hospital.

"There's clearly a need," Foust said.

Date published: 1/17/2006

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