Once fractured by competition from two upstart specialty hospitals, Lafayette’s health care community is reinventing itself — and investing hundreds of millions in new facilities to serve a growing patient base. 
The landscape of Lafayette’s health care community is markedly different than it was just five years ago — and the next few years promise a major overhaul, with long-established facilities investing hundreds of millions of dollars in new medical infrastructure and improvements.
When the dust settles, Lafayette’s reputation as a specialized medical hub for Acadiana — and likely the state — will be firmly established with most services delivered by its five major hospitals or facilities in which they have a large ownership stake. Those hospitals are Lafayette General Medical Center, Our Lady of Lourdes, University Medical Center and the HCA-owned sister hospitals Southwest Medical Center and Women’s & Children’s.
It wasn’t always clear this would be the case, as recent years have seen fierce competition among full-service acute care medical centers and competing specialty hospitals, much of which took root when disgruntled local physicians decided to strike out on their own and start two boutique hospitals. In March 2004 those for-profit facilities, Heart Hospital of Lafayette and Lafayette Surgical Specialty Hospital, opened side-by-side on Kaliste Saloom Road, following a national trend favoring physician-owned specialty hospitals and signaling what appeared to be a major shift in health care delivery in Lafayette.
From a competitive standpoint, Heart Hospital became the fourth open-heart program in town, with LSSH’s doctors pulling in orthopedic and neurological; ear, nose, throat; urology; general surgical and pain management business.
The Independent Weekly closely monitored the fallout, noting in an April 2005 story, “Special Forces,” that the impact on both of Lafayette’s not-for-profit community hospitals, LGMC and Lourdes, had been immediate. The specialty hospitals, both comprised of differing structures of physician owners, and their high-revenue procedures were siphoning business from other local hospitals. Most important, they were diverting the revenue both LGMC and Lourdes needed to offset indigent care. For-profit Southwest Medical Center, mainly because of its close relationship with Cardiovascular Institute of the South housed on its campus, was the full-service hospital least affected by the new competitors.
Many in the medical community were sure the end result would leave Lafayette with one less hospital, believing LGMC and Lourdes could not both survive the declines in patient volume. Lourdes, which at the time had just announced its hopes to merge with the Heart Hospital (after LGMC and Heart Hospital’s failed attempt to partner), was clearly hardest hit. Asked by The Independent Weekly in May 2005 whether the two community hospitals could survive the blow to their bottom lines, Lafayette neurosurgeon Patrick Juneau III was one of many who had his doubts. “I don’t know the answer to that,” he said.
LGMC’s David Callecod
Photo by Robin May
The Lourdes-Heart Hospital deal soon fizzled, rekindling talk of the hospital’s financial troubles.
Within less than a year, however, speculation about Lourdes’ problems had all but dissipated. It became clear that both community hospitals had not only weathered the storm but were positioning themselves to emerge even stronger.
After Lourdes hired Bud Barrow as its chief executive officer in early 2006, recruiting him from Opelousas General Health System, the hospital began charting a new course. Barrow took over the top post from Robert Peebles, who had joined Lourdes in mid-2003 after the specialty hospitals were already under way. The two shared a philosophy over partnerships with physicians, and Barrow went to work striking deals with local doctors. The new focus and Barrow’s management style were a successful combination for the ailing hospital.
Barrow followed through on Peebles’ efforts to find a new campus for the almost 60-year-old facility, within a year securing 45 acres of prime real estate near the intersection of Ambassador Caffery Parkway and Verot School Road for $14 million. Another coup for Barrow came later in 2007, when he reached an agreement to buy out Heart Hospital’s North Carolina-based partner, MedCath Corp., to become majority owner of the once fierce competitor. The Lourdes deal had been successfully negotiated on the heels of the local physician-owners’ failed takeover of Heart Hospital from MedCath earlier that year.
Close observers of the local health care industry believe Barrow’s turnaround at Lourdes may have been a driving factor in LGMC’s decision to launch a national search for a new leader at its hospital. After the controversial departure of CEO Jamey Thaw in October 2007 (he had taken an unexplained leave just before resigning), LGMC cast a wide net for his replacement and found impressive credentials in David Callecod, the top administrator at a hospital in Marion, Ind. Callecod, who moved his family to Lafayette this summer, may prove equally aggressive at combating competition, as The Independent has learned LGMC has renewed talks with LSSH. Callecod would not comment on speculation of a potential buy-in. “Anytime we’re given an opportunity to partner with the physicians, we certainly look at it,” he says. Unlike Heart Hospital, which had a major partner, LSSH is entirely physician-owned.
What Callecod is willing to talk about publicly is LGMC’s estimated $75 million overhaul of its Oil Center hospital, where it also has just completed a $20 million women and children’s addition called The Pavilion.
“This project will allow us, at the end of the day, to provide Lafayette and Acadiana with a brand-new, 328-bed facility,” Callecod says. The plan is to gut every floor, enlarge every patient room from an average of 124 square feet to 192 square feet and update all infrastructure including wiring and plumbing. Most of the patient rooms have served the hospital’s population for more than four decades. “They need to be gutted,” Callecod says.
Southwest Medical Center’s Kyle Viator
Photo by Robin May
The first phase of LGMC’s renovation, set to begin within 90 days, is the addition of 50 beds to allow for renovation of the remainder of the hospital without losing bed capacity. The entire project is expected to take 24 to 36 months. Like Lourdes, LGMC also considered constructing a new complex to replace its outdated facility, but a new facility would have run about $350 million without land costs, Callecod maintains, acknowledging the renovation may not necessarily be the easiest route. “It’s going to present a lot of challenges to me and the management team,” he says. Once complete, the renovated hospital will be technologically and physically capable of meeting the community’s needs for the next two to three decades, Callecod says.
LGMC also wanted to stay centrally located in the Oil Center, where its complex of clinics, doctors’ offices and 4-year-old Lafayette General Surgical Hospital (an outpatient center developed in partnership with local physicians) is spread among a mix of business and residential components. “I look at the Oil Center as [Lafayette’s] original traditional neighborhood development,” Callecod says.
While LGMC and Lourdes were battling it out, Southwest Medical Center and its sister hospital, Women’s & Children’s, were also positioning their facilities for 21st century medicine, investing millions in improvements and additions.
Kyle Viator, Southwest’s CEO, is hoping to secure funding any day now for a $14 million medical office building on its campus at West Congress and Ambassador Caffery Parkway. The 53,000-square-foot, three-story building will accommodate existing practices planning to bring in more physicians as well as new specialties being added to the hospital’s suite of services. “We have basically run out of medical office building space,” Viator says, noting the hospital will focus on development of a broader primary care network in 2009 to support Lafayette’s growth and as a feeder system for the subspecialties on its campus. Next year Southwest will also explore ways to expand its surgical capacity after experiencing substantial growth this year in operating room surgeries, a problem compounded by the strain its new spine and neurosurgery program will put on existing resources. “We’ve started the neurosurgical program, but initially limited it to basically spine and back work and not cranial work,” he says. “Next year, as we get into probably the end of the first quarter, we will begin to do cranial work.”
At Women’s & Children’s on Ambassador Caffery, a new medical office building called the Kids Specialty Center, which included a lab, imaging and offices for a number of pediatric subspecialists, was completed this year at a cost of $12 million, according to COO Patti Monczewski. The hospital also funded, built and opened the Elaine M. Junca Women’s Imaging Centre in April 2008, spending $7 million. “We are looking at expanding hospital bed capacity to include additional labor and delivery suites, high-risk ob beds, neonatal intensive care unit and well baby nursery beds,” Monczewski says. “We are just in the design phase right now,” she adds. The hospital hopes to start that project in 2009.
If all of these hospitals make good on their capital expenditure promises, health care will likely fuel commercial construction in Lafayette Parish more than any other sector over the next several years. In 2008, upwards of $23 million in hospital renovations, new medical offices and medical office renovations were permitted in Lafayette Parish, down from $40.6 million the year before, according to local government records. One promising sign for all of these planned projects is that construction costs have been falling due to a softening of the national economy. The flip side, of course, is the potential any local downturn could have on Lafayette’s health care providers.
Lourdes’ Bud Barrow
Photo by Robin May
Callecod does not think a change in Acadiana’s economic situation would drastically alter LGMC’s construction plans, but he is monitoring the situation. “I’m concerned because of all the horror stories I’m hearing from my colleagues in the Midwest,” he says, noting how inpatient and outpatient volumes are down in other areas of the country. “We certainly have the [financial] ability to see these projects through,” he adds, “[but] we’ll have to continually look at the costs we have and really analyze them if we have clear change in volume.”
Though Lourdes has yet to disclose the estimated cost of its new hospital complex, dirt is already turning at the site. Barrow is adamant that a potential economic downturn will not adjust Lourdes’ plans. “A greater concern is to be ready for the growth, rather than if the growth will stop,” he says. If necessary, Barrow maintains, the Franciscan Missionaries of Our Lady Health System will suspend other capital projects to see this one through. “The whole system has kind of gotten behind this,” he says.
Barrow also confirms that Lourdes is now leaning hard toward expanding the Heart Hospital at its current site rather than moving those services to the new campus, as it had originally envisioned.
A final decision on what services will relocate from the current campus at the corner of St. Landry and St. Mary streets to the new site has not been made. “We’re spending an awful lot of time on community needs assessment [including] a senior care strategy and the challenges associated with assisted living,” Barrow says. The existing hospital may cater to the growing number of seniors in need of health care services. In 2008 Lourdes also purchased 52 acres on I-49 across from the old Evangeline Downs, but it’s unlikely any development will take place there before 2011, as Ambassador Caffery will be the hospital’s focus.
It’s still not clear what drove docs once adamant about doing their own thing away from their new-found independence and back into the community hospital fold. What is undeniable, however, is that these boutique hospitals helped solidify Lafayette’s reputation and market position as a specialized care center. “With the variety of services offered at the major systems and specialty hospitals in Lafayette, more and more of the specialty care in Acadiana is being provided right here in Lafayette,” Callecod says. “That trend continues to grow and will be magnified even more with the physician shortages that will occur in the next five to 15 years.”
Callecod continues, “Competition is a good thing. ... Their emergence has also prompted the existing facilities to seek out new technologies, new programs, new services to make up for the anticipated loss of volumes. All of these new services have brought additional patients to Lafayette.” He says the boutique centers helped raise the bar on patient outcomes, quality of care and the patient’s experience with the health care system as a whole. “I believe it has caused hospitals nationwide to evaluate their programs and adapt to compete, which in turn has improved the care delivered to the patient. In looking at the changes ahead with reform, reimbursement, state and federal budget deficits, providers are certainly considering banding together and seeking ‘safety in numbers’ as we move into the future.”
While the ultimate outcome may be a net positive, there is no denying community hospitals have suffered through a painful transition, much of which Barrow believes hospitals brought upon themselves. “I just think that as these boutique hospitals have matured they’ve recognized [we’re] better off working together than apart,” he says, surmising that physicians have now realized they can accomplish their goal of empowerment through joint-ventures with hospitals. “They’ve got a voice that they should have had [years ago],” he adds. “It was the major hospitals’ fault for the dysfunction.”