City Paper is not for tourists
Dr. Safa Rifka had already climbed to the apogee of his career in 1996, when physicians at Columbia Hospital for Women elected him president. He had done groundbreaking research at the National Institutes of Health (NIH) and Georgetown University; his fertility work had taken him to London, Riyadh, and Beirut. He had published in medical journals, spoken on network television, and written a chapter for the Merck Manual, the respected how-to book for doctors. His practice paid him more than $1 million a year.
The hospital also had an international reputation. Foreign diplomats and royalty came from all over the globe to pay specialists like Rifka ample fees, while other doctors provided the same vaunted care gratis to impoverished D.C. women and teens. The Betty Ford Comprehensive Breast Center served women from across the nation, giving thousands of free mammograms each year. Tiny, undernourished infants survived their first months of life in Columbia’s neonatal intensive care unit. Even its 82-year-old facade of elegant gold masonry on the 2400 block of L Street NW made the hospital a welcoming downtown landmark as steel-and-glass office complexes advanced on all sides.
But an emerging financial crisis menaced both hospital and doctor. Like other, similar institutions, Columbia had to brave the exigencies of managed care: Hospitals would no longer be long-term resorts for the ill and infirm, and doctors would become moilers, not masters.
Beyond shifts in services and doctors’ changing roles, Columbia had unique troubles. As Rifka perceived it, a clan of moneyed socialites on the board of directors had used the 132-year-old institution to boost both career and cachet, while ignoring the changes in the health-care economy that threatened to sink the whole enterprise. By 1996, annual losses would swell to $17 million. Still, Rifka contends, board members made no efforts to find new sources of revenue and donations. Instead, he says, they allowed administrators to slash programs, without evaluating their costs. He also alleges that they signed off on business decisions without a basic understanding of the issues involved. And he claims that they handed business opportunities to their own companies. “They managed the way you would manage a country club,” Rifka now asserts. “They were uninvolved, uninterested not community-based. When it started getting tough, they didn’t know what to do.”
But hospital board members think Rifka’s attacks are groundless. “This was an extremely conscientious board,” retorts Joan Tansey, a former board chair. “No one sought to profit from the hospital. The board’s strongest concern was to do everything they could to help the hospital.”
A clutch of physicians like Rifka fretted that a panicked board would squander the hospital’s legacy and the doctors’ lucre by selling out to a for-profit company. Proceeds would be packed off to Wall Street, scuttling the privileges at Columbia that both doctors and patients enjoyed. Rifka wasn’t alone in his preoccupation, but he alone would seize the moment. To him, the board represented an apathetic brood of American aristocrats, and he’d be damned if he’d let their dispassion spoil what he had labored to achieve.
The young Lebanese physician had completed his medical degree and his residency at the American University in Beirut in 1975, just before civil war sundered the country. Surrounded by imminent destruction and death, Rifka pursued a specialty, fertility, that affirmed life. “Because of my history, I chose a profession that makes me sign birth certificates, rather than death certificates,” he reflects.
Rifka continued his relentless pursuit of achievement after coming to the United States on an NIH fellowship and acquired two board certificates as a surgeon, for which his skills and knowledge were tested. But Rifka also had other attributes that qualified him for leadership of a cadre of hard-nosed, high-caliber doctors. His Columbia practice was remarkably successful; his caseload ranked eighth among those of 400 doctors, his earnings among the highest. Productivity commanded respect and envy. “The guy [was] walking away with a ton of money,” says Dr. Lewis Townsend, a disenchanted Columbia veteran. “I’m not saying he [didn’t] generate it.”
Twenty years of transforming sterile couples into grateful parents had sired in Rifka an indomitable optimism and blessed him with a disarming charm that he could light and snuff at will. “Hello darling,” he joyfully greets a patient as she enters his office. She praises the surgeon’s bedside manner: “He listens carefully, and he answers whatever questions you might have.”
Rifka’s complexity would both invigorate and constrict him as he set out to champion the doctors’ cause. His colleagues wanted enough power on the board to influence its actions and rescue the hospital. But they chose to focus on the boards’ shortcomings.
“They meet one hour every month, they sign on everything the administrator requests, they take drinks of Coca Cola and Scotch, and they go home,” Rifka observes. “That’s not how you run a distressed hospital facing mounting challenges of the 21st century.”
Many of the players in the hospital drama would endure the force of Rifka’s will. Board chair Janet Holt, a partner in the white-shoe law firm of Hogan & Hartson, received her share of invective; when she stepped down, in 1997, he lambasted the next chairman, Brainard “Hank” Warner, a stockbroker for Washington’s blue-chip families. Both would tepidly deflect his attacks. But neither Holt nor Warner, nor the last 50 members of the hospital’s governing boards, could match Rifka’s conviction or his antipathy. The boards ruptured. The hospital’s debts overwhelmed its revenues. Finally, early this year, Columbia careened into bankruptcy court, a victim of hubris and hostilities.
New directors assembled by Rifka and other physicians unveiled a bold new restructuring plan early last week. Patient care has never been interrupted, and the hospital has not avoided paying any bills. But the loyal Columbia old guard still insist that Rifka may have destroyed what he set out to save.
“My father was born there, I was born there, and my son was born there,” mourns Warner, who served on the board for three years. “It’s sad. It’s a great hospital that had a mission for women; now they [may] no longer have the ability to carry out that mission.”
Congress created the birthing hospital in a unused federal building during the Civil War, when combat brides and widows were reportedly delivering babies in parks and on the steps of the city’s Victorian mansions. During the rise of the middle class in the 20th century, it became the preferred charity of congressional spouses, first ladies, and other local do-gooders. These society women could coddle their consciences by giving women of all classes a safe place to deliver their offspring.
Traditionally, the hospital pampered its clients in the style of the affluent, and Columbia still aspires to give its patients the kind of luxurious care that once was the province of the wealthy. Women are treated to classes in breast-feeding, labor, and new motherhood; their nurses offer individualized care in palatial, wood-paneled rooms. Because Columbia is a nonprofit hospital, tax regulations require officials to give succor to the poor as well as the rich by creating programs in the community. In 1987, the president of the medical staff, Dr. John Niles, made good that obligation when he founded Columbia’s teen clinic, which provides adolescents pre- and post-pregnancy care and protection. His wife, Amy Niles, directed the National Women’s Health Resource Center, a clearinghouse of medical information that brought in no cash but provided goodwill.
But as insurance companies began to dominate hospital decision making, they grew reluctant to subsidize that kind of charity work. As revenues shrank in the ’80s, Columbia’s administrator, Patrick Kane, recognized that the hospital needed to maintain and boost its financial position, so he broadened Columbia’s scope of operations and stepped up its cash generation. Columbia remained a nonprofit institution meaning that all profits were reinvested in the hospital but Kane wanted to bolster the business side of the operation, and he brought a dozen renowned specialists to the hospital by offering them generous compensation packages.
Rifka’s was among the most generous. A successful fertility specialist whose work at Georgetown University Hospital had taken him to the frontier of reproductive medicine, he was as good as a brand name for Columbia, as were other newly recruited fertility specialists such as Rifka’s colleague Richard Falk. Rifka also brought with him his international following. His facility with Middle Eastern languages attracted clients from all over the Arab world. In exchange for his willingness to affiliate with Columbia, the hospital agreed to perform his billing and administration while collecting only a third of his revenues before taxes, according to Rifka.
Before the advent of managed care, physicians with different kinds of specialties attracted payments from insurance companies and Medicaid or Medicare. These third-party payers were not as beneficent as cash-paying clients, but they still helped build hospitals into economic boom towns. “You asked for money and [the insurance companies] paid,” Rifka recalls. “You asked for more, [and] they paid more.”
By the mid-’80s, the hospital had effectively created a whole universe of medical care surrounding women and for a time it was both lucrative to its staff and advantageous to the community. “I like the fact that it’s a woman’s hospital,” says Patti Grant-Wilkinson, 34, a lawyer who gave birth at the hospital six years ago and is planning to deliver her second baby there in a matter of months. Her 30-year-old sister, Carla Grant-Pickens, who is also pregnant, will deliver her first child at Columbia. “We have other hospitals within 10 minutes. But I would probably have my baby in the car before going to other hospitals.”
Kane’s strategy expanded services to women, and it allowed the hospital to invest not just in the community, but also in capital projects. In 1988, Kane and the board of directors decided to remodel the hospital, expand, and build offices for more physicians, who would help boost the bottom line by paying rent. The hospital’s nonprofit status allowed the city to float tax-free bonds to finance the construction. But the bonds had to be backed either by a sterling bond rating, which takes time and money to achieve, or by another form of collateral. Kane and the board obtained a letter of credit from the Mitsubishi Bank.
With its real estate valued in the multimillions and substantial construction planned, the hospital’s decision to open a $25 million line of credit seemed a reasonable risk. Under the bank’s terms, the hospital had to maintain minimum cash flows as well as keep revenues at or above 125 percent of its required debt payment each year.
But the ratios were harder to meet after the health-care market changed in the 1990s. As health maintenance organizations (HMOs) cut hospital stays and insurers questioned every expenditure, Columbia and its doctors lost both patients and revenue. “In the ’80s, I got $3,200 for a delivery,” recalls Townsend. “Today, I get $1,800. My father was paid $1,800 in 1979.”
The hospital’s financial erosion was also complicated by the shift in Washington’s population during the ’80s. Between 1970 and 1990, the District lost 100,000 residents a third of those in the ’80s. Columbia’s admissions fell by a third, from 15,380 in 1987 to 10,235 in 1997. Other hospitals also experienced patient losses during the first seven years of the ’90s, an average of one-third of the city’s hospital beds remained unfilled. The economics of scarcity intensified competition between hospitals.
Large corporations like Medlantic Healthcare Group and Providence Hospital, with services in other cities, enjoyed the benefits of size they could buy supplies in massive quantities and shift expenses from one location to another. Within the city, full-service hospitals could offer their patients one-stop shopping, and by referring women and pregnant mothers to their staff OB-GYNs, they could keep the business in house. For a brief time in the ’80s, Columbia was merged with Medlantic, and the larger institution sent women to the smaller niche hospital; but that affiliation did not survive into the ’90s, according to former Executive Director Susan Hansen.
Columbia entered the toughest time in hospital history beginning in 1992 with no partner to send it referrals. Bigger hospitals had cornered most of the HMO contracts. Columbia owned only its good name, built from decades of deluxe services, and the goodwill of the community.
The $25 million letter of credit also had become unwieldy as the hospital became less able to meet the financial ratios mandated in the loan covenant. When the letter of credit expired in 1993, hospital officials could not restructure or refinance. Kane, the hospital administrator, adjusted some doctors’ pay downward Columbia increased its take from Rifka’s check to 35 percent, for example and bought more time from the bank by handing over a security interest in its revenues. Mitsubishi extended the letter of credit for three years.
Kane also cut lower-echelon employees. Columbia’s niche, its trademark services, its luxury accommodations, and its superb medical care suffered. “They were clipping nursing positions people who were vital,” relates obstetrician Townsend. “They were told, ‘Pack your box,’ and they were escorted away. A patient came in, she saw an overworked staff, she couldn’t get medicine the services were horrible.”
Townsend had a personal stake in the hospital where his father had been chief of staff for many years. His outspoken protests echoed the worried murmurs of physicians like Rifka, whose livelihoods depended on Columbia. They viewed Kane, who had planned to retire in 1994, as overmatched. When the board voted to keep Kane on for an additional year until members found a proper replacement, the doctors who supported Rifka focused their fear, and their fury, on the board.
By the mid-’90s, Columbia’s board of directors had 150 people who served on a succession of primary and auxiliary boards as well as on a multitude of committees. The boards’ composition reflected the city’s staid but fading aristocracy. Some had bloodlines to American historical figures, artists, or writers; others boasted commercial success. Their ranks included an independent insurer and international contractor as well as bankers, Ivy League lawyers, architects, stockbrokers, and investors. The physicians had two top representatives on these exalted panels: Nabil Asterbadi, vice president of the medical staff, was an ally of Rifka and other dissatisfied doctors; John Niles, the congenial medical staff president, was their nemesis. Niles nourished one of the busiest obstetrics practices in the hospital, and he was not threatened by the financial wounds that worried so many of his colleagues. The Rifka-Asterbadi coalition decided that Niles was an instrument of the board. In the coming battle, they wanted someone with a taste for combat to represent their interests.
As the doctors agitated, the financial picture darkened. The board was seriously considering merging with George Washington University Medical Center, which had survived its own battles with the bottom line. The Rifka faction did not approve of the marriage. Niles believed accommodation and diplomacy offered the best chance of saving the hospital. His medical colleagues thought the time for passive resistance was at an end.
As Niles sees it, Rifka and Asterbadi believed he was too cozy with the establishment. Not only had Niles supported the contract renewal of Kane at a time when the doctors demanded change, he had also sat on the committee that made an initial foray to George Washington. Ousting Niles as their president would unify the physicians for the first time and strengthen their fledgling crusade to take over the hospital’s management. In the weeks before the March 1994 election of the medical staff president, Niles began to hear rumors about himself in the hallways. Word was that he had gotten a financial reward for voting to hold on to Kane; word was that he supported the George Washington merger. Niles sent around a letter to all medical staff to refute what he considered lies. But the physicians installed Asterbadi as their president anyway.
Asterbadi made little headway in two years. The board wanted to sell the hospital and was also contemplating a partnership, he reported to the physicians. He knew the other doctors opposed either move, but Asterbadi could not deter the board he had a voice, but only one vote. In September 1995, the board hired Hansen, the former chief executive officer of a nonprofit Philadelphia hospital, to prepare Columbia for sale or merger.
Rifka and his peers vowed they would never let that happen, and an effort at self-evaluation by the board gave them the opening they needed. That fall, Orlikoff & Associates, a consultant firm hired by Hansen, led the board in a wrenching effort to identify the hospital’s weaknesses and reorganize for more effective management.
The final Orlikoff report indicated that some board members questioned their own expertise for making the tough decisions ahead. It also questioned whether Columbia’s conflict-of-interest policy adequately protected both the individual board members and the hospital.
As early as 1993, some doctors, including John Berryman, had challenged the board’s wisdom in allowing directors’ families’ businesses to provide services for a fee. First American Bank had handled the hospital’s financial transactions for 45 years, for example, while bank officers served as voting members of the board. The board members had a policy to protect the hospital from unwarranted conflicts of interest, but to the doctors this policy amounted to nothing more than a system of quid pro quo. “Each year, we were obliged to state any affiliation we had with anyone doing business with the hospital,” says James Agee, a former board member and retired senior vice president of First American. The doctors’ travel was arranged through the travel agency where he worked. “The board members voted whether to review it,” Agee adds. They generally gave their assent.
Rifka, Berryman, and others were especially suspicious of the money paid to board members’ families during the hospital’s major renovation project in 1988. Hansen says it is still unknown whether these relationships contributed to the decision to take on a debt that finally became unwieldy, or whether the hospital overspent on renovations. Board member George Lamphere had been president of Charles H. Tompkins & Co. when it successfully bid for $4.9 million in construction work, according to Rifka and court documents. Hickok Warner Fox Architects, in which Hank Warner’s brother was a principal partner, had been paid $125,000 for designing doctors’ offices, also according to Rifka and court documents. Another board member, a partner in Arent Fox Kintner Plotkin & Kahn, had helped arrange the letter of credit with Mitsubishi Bank to back the hospital’s construction bonds, and the hospital had paid his fees, according to Hansen and Rifka. Agee’s bank, First American, had also earned some fees in the bond transactions, according to Bank of Tokyo pleadings.
The doctors viewed all of these relationships as equally evil, without studying any one of them to determine if they had actually been improper or resulted in any loss of money by the hospital. Some of the relationships may well have worked to the hospital’s benefit, but the possibility of any conflict was enough for Rifka and his allies. In letters signed by the 20-member medical executive committee, Rifka broad-brushed these arrangements with the paint of “self-dealing.” In fact, Tompkins bid for the construction work, and Lamphere says he did not assist the company in preparing the bid and was not present when the bids were unsealed. Agee also maintains that neither he nor the bank violated any ethical guidelines. Warner says he knew nothing about the Hickok Warner Fox contract to design offices.
It’s not uncommon for members of a nonprofit board to do business with the organization some boards consider such relationships to be assets. But the Orlikoff consultant determined that in a city as plump with professionals as Washington, board members should not employ their own or their families’ firms, Hansen says. Instead, the consultant advised, the board should not allow even the appearance of conflict to exist and the doctors’ complaints gave the consultant all the evidence he needed to back that assertion. “I think the board had good intentions, but the fact is, those board members were involved in companies, and those companies did business with the hospital,” Hansen reflects. “One of the things that we accomplished in 1996 was the board did restructure itself and rewrite its bylaws so those conflicts of interest did not exist.”
By the time the medical staff elected Rifka president, in April 1996, the doctors had defined what they wanted to accomplish. First, they had to have a significant voice in the management: more votes on the board. For years, the Internal Revenue Service had limited “insiders” on nonprofits to 20 percent of the voting structure, but those requirements had been eased, and the doctors wanted the full 49 percent of insider representation allowed under the new IRS guidelines. The physicians also demanded that the board be restructured and reduced in size to be less unwieldy. The doctors also wanted its membership to mirror the city’s ethnic makeup.
The boards reduced their members to 42 and streamlined into three panels, with one given final voting powers on significant decisions. But nothing the directors did to reform would satisfy the doctors, and Rifka used what he perceived as conflicts as leverage against his overseers. In July 1996, Rifka called a doctors’ boycott of all board meetings. In August 1996, the medical staff officers passed a unanimous vote of no confidence in the board.
But the doctors’ challenges didn’t end there. Far more threatening was their decision to challenge the very accreditation of the hospital. The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) was expected to inspect the hospital late in August 1996. The doctors told board members they would inform the commission about what they believed to be ethical conflicts, as well as charging that patient care was suffering as a result of equipment problems, according to July 1996 correspondence from Rifka to Hansen. It was a potentially fatal threat. If the commission denied accreditation, Columbia would lose insurers as well as its Medicaid and Medicare certification. Every employee would lose time and money. Still, Rifka promised that if Hansen did not postpone the inspection, “we will have no alternative but to bring to the JCAHO’s attention all the serious issues affecting patients at Columbia Hospital.”
Hansen refused to give in to the threat. But Holt, the board’s new chair, appealed to Rifka and his allies, according to letters. (Holt refused to comment for this story.) They were still boycotting meetings. “Columbia Hospital for Women has always considered strong physician board participation critically important in maintaining the excellent level of patient care we provide to this community,” she wrote Sept. 6. “I urge you to rejoin the board and committee meetings in order to effectively advocate your views on that as well.”
Rifka and other doctors spurned Holt’s entreaties and met with the JCAHO instead. Their concerns about alleged conflicts of interest, staffing, equipment, and control of the board would resurface in the JCAHO’s October report. The inspectors would find that Columbia had “no compliance” with the JCAHO standard recommending that the staff and boards follow a code of ethics, but they extended the hospital’s accreditation anyway. The doctors’ ploy had failed.
Holt’s own compromise offer also flopped. The board gave the doctors a 49 percent share of a single board that of the medical center but that board could only influence decisions; its members couldn’t vote. Only the foundation board had any authority, and Rifka’s was the doctors’ only vote on that board. Rifka quickly surmised that Holt hadn’t ceded any real power to the physicians.
Thwarted in their attempt to influence board members by threatening the hospital’s accreditation, the doctors moved into the public sphere to prevent an unwanted sale or merger. In October 1996, they sued the board of directors, imploring a judge to exact damages incurred as a result of the alleged conflicts of interest and demanding that the court prevent the hospital’s sale. “After years of defendant’s mismanagement and self-dealing, the hospital is purportedly on the verge of financial collapse,” the doctors alleged in their October 1996 lawsuit, Rifka signing on as one of two named plaintiffs. “Defendants claim that it cannot survive as an independent institution, and that it must be immediately sold.”
Alan Galbraith represented the board members in that suit. “They denied at the time and continue to deny any allegations of self-dealing,” Galbraith says. “The economic situation deteriorated, and the hospital lacked the political will to pull together a partnership due, in no small measure, to the doctors who would not put their own self-interest aside.”
The legal assault failed as well. By the time the judge dismissed the doctors’ suit on a technicality in mid-December, the board had already conferred with three potential for-profit partners: Medlantic, Universal Health Services Inc. (which would later partner with George Washington) and Suburban Hospital. To Rifka, the physicians’ stratagems had all come to naught, and the merger threat loomed.
But they faced even more perils: The Bank of Tokyo had acquired Mitsubishi Bank that fall, and a new bank manager, John R. Blasi, toured Columbia in December. He was reportedly none too impressed by the hospital’s financial status. (Blasi, through the bank’s attorney Dennis Drebsky, refused comment for this story because of pending litigation). Losses by the end of fiscal year 1997 would approach $17
million. The Bank of Tokyo would have to
Late in the evening of Jan. 9, 1997, Rifka slipped into Hansen’s office for a meeting. The hospital’s lawyer stood by her side. All three of the hospital’s governing boards had to vote on the hospital’s dealings with its bank. Hansen picked up the phone.
“The remaining directors connected via cellular telephones…from their cars during the Washington rush hour, or were patched in from home,” Rifka said in an affidavit. “No written materials were provided, and no separate deliberation was conducted by any board.”
Hansen presented Rifka and 37 other board members with a short history. She had met once again with banker Blasi, who had threatened to call the letter of credit. To appease him and buy time for Columbia, she had agreed to grant Tokyo a lien on $10.5 million of the hospital’s $11 million annual cash flow. Board members had already approved the agreement at an earlier meeting, Hansen says. But because the doctors questioned whether that meeting had had a quorum, she needed all the boards to ratify the decision. If they didn’t, she warned, the bank would close the hospital.
Rifka, along with the majority, voted yes. But as soon as the board ratified the agreement, he upbraided the other board members who had signed on to it. His plaints had a familiar cadence: “To enter into the proposed refinancing on the onerous terms demanded by [the bank]…would itself constitute a plain breach of the members’ fiduciary duties,” Rifka wrote Jan. 15.
The physician’s harangues would finally erode the board’s resilience. The following week, Janet Holt resigned after a decade of service to Columbia, blaming Rifka for her departure. “It has been difficult to conduct meetings as a result of the disruptive behavior of Dr. Rifka,” she complained. “We wasted precious time repeatedly discussing the dispute with the medical staff.”
Rifka makes no apologies. “All the old board members were against me,” he avers. “But I was there, elected by all the physicians, so I carried a lot of weight on the board because I represented the customers of the place.”
Holt wasn’t content to complain about abuse at Rifka’s hands. She also questioned why Rifka was allowed to continue collecting his pay even though his contract had expired. Because he had not renegotiated the agreement, his earnings had not been scrutinized by board members newly attuned to the hospital’s money problems as they certainly would have had Holt remained on the board. “The data I have been shown is troublesome it indicates that although the medical center paid Dr. Rifka in excess of $1 million last year, it earned only $12,000 [after expenses] as a result of his services,” Holt wrote. When Rifka demanded in a letter that Holt retract her criticisms, she refused, writing a rebuttal even after she stepped down. Rifka dismisses Holt’s countercharges. “This is not a personal fight,” he thunders. “If I make money here, I can make it at Sibley [Hospital]. We’re saving this hospital for the community.”
With Holt in retreat, Warner took over as chair of the hospital foundation. Rifka had helped elect him, but he would serve for only 30 days.
Like Holt, Warner tried to placate the physicians while protecting the hospital’s interests. The board passed a “code of ethics” barring board members from talking about business matters under discussion outside the boardroom. Rifka saw it as a gag order. Townsend, the veteran physician, says Warner supported his bid for elective office in opposition to Rifka’s clique. But the majority was united behind Rifka. “I and some people on the executive committee tried to create a force against Rifka,” recalls Townsend. “We were regaled with stories [by Rifka] about how bad administration was.”
After Townsend lost a bid to become chief of obstetrics, he moved to Sibley Hospital taking with him one of Columbia’s busiest, most profitable practices. “Rifka figured that no way could he lose me,” posits Townsend. “I worked my butt off for this place. But I basically said fuck you, and that’s when Sibley invited me.”
Warner’s advances were stymied, but he didn’t stop there. When Rifka decided that the board had failed to seek an alternative lender to Tokyo, he created a board committee to launch that search. But Rifka claims that Warner stonewalled him when the physician asked a Wall Street investment firm to refinance. The physician claims he tried more than three times to obtain financial information the investment firm needed to evaluate its risks. But Warner says Rifka himself withheld the facts.
Besides, Warner was already searching for alternative financing. By the end of January, that effort, too, would fail. “If I were to purchase Mitsubishi’s interest in the letter of credit,” Potomac developer-investor Charles J. Demmon wrote Warner in January, “my pricing would be adversely affected by the Foundation’s precarious financial condition.”
Demmon pointed out that, whereas other District hospitals had spent just more than a third of their revenue on salaries and benefits in 1996, those items had consumed two-thirds of Columbia’s earnings. Labor and insurance costs generally represented 70 percent of revenues, but the combined figure gobbled 100 percent of revenues at Columbia, Demmon wrote. “This poor performance raises questions about the viability of the hospital,” the letter continued.
To Warner, the answer was obvious: Columbia had to find a partner or die. He made one final bid to win Rifka’s confidence. The board granted the physicians their vaunted 49 percent vote on the only board that mattered the foundation board. “Can the Hospital be sold, merged, or affiliated without the medical staff’s input?” Warner asked encouragingly in a hospitalwide missive. “No.”
Again, Rifka wasn’t satisfied. At the end of February, the physician rejected Warner’s friendly advances by letter. But Warner and the board acted anyway.
On March 3, 1997, the board voted to dissolve the corporation and seek a court-appointed receiver. It was a desperate attempt by Hansen and Warner to put the hospital in the hands of an expert administrator who would not be hobbled by infighting. The doctors’ delegates to the newly enlarged governing panels didn’t even get a chance to take their first vote. That night, Warner, hospital attorney Alan Galbraith, and Hansen convinced a judge to appoint Hansen as temporary emergency receiver.
But Rifka moved to block the dissolution of the hospital’s governing structure by sprinting to court the following morning, just in time to stop the judge from formalizing Hansen’s role as receiver. The jurist appointed a former Georgetown University Hospital administrator to that position instead, and agreed to allow Rifka and the doctors’ attorneys a hearing on proposed receivership.
It would be the first of Rifka’s conquests. The following month, the doctors dissolved the receivership in court. The hospital had paid its bills; its cash flow totaled $11 million; its assets, they claimed, represented another $42 million. They contended that the hospital had no justification for receivership. The judge agreed.
The doctors wasted no time once they had prevailed in court. Within days of the judge’s decision, they convened a new board, with only 11 members, of whom more than half six were medical staff. The new board accepted Hansen’s resignation and appointed NIH policy expert Sandy Chamblee, a former board member whose resume displays no hospital management experience, as interim director. “She worked day and night for no pay except maybe a cheese sandwich,” Rifka says.
Rifka himself remained president of the medical staff. No longer the foreign doctor with an agenda the enemy of the mainstream he now held a position of authority. But despite his new power, Rifka and the doctors faced a major obstacle: the Bank of Tokyo. Bank vice president Blasi was unimpressed by the physicians’ coup d’etat. He was more interested in the fact that while Rifka had been wrangling with Holt and Warner, the hospital had lost $17 million the largest annual deficit in its history.
Rifka and the new board, emboldened by their success in reversing the receivership, set their sights on their lender one of the largest banks in the world. In their lawsuit against the bank, the doctors revived the old charges of the board’s self-dealing and conspiracy. This time they alleged that Blasi and the bank had secretly conspired with Hansen and the former board to deplete the hospital’s assets. They asked the judge to invalidate the bank’s liens and the agreements the board had ratified under Warner.
But the Bank of Tokyo’s attorneys proved they could not be easily intimidated. In January 1998, Tokyo simply refused to extend the letter of credit, forcing Columbia into bankruptcy court.
In February, the board asked for Chapter 11
protection. “They roll over you and destroy
you, and your silent screams will never be heard,” Rifka reflects.
By June of this year, Columbia’s demands that the bank’s liens be immediately invalidated had twice been rejected by judges, in D.C. Superior Court and on appeal. An appellate judge had no qualms about the Warner board’s decision, during the conference call, to ratify Tokyo’s lien on $10.5 million in cash; the judge did not find the bank’s other restrictions overly onerous. Six months into Columbia’s court battle, the bank’s lawyers mock the doctors’ accusations: “This action, which from its inception has had a certain Alice in Wonderland quality to it, has now descended to the Theatre of the Absurd,” the bank’s briefs say.
After Rifka had pushed so hard to prevent a partnership, the proud physician found himself on a team negotiating, from a position of weakness, with Universal Health Services. The for-profit health-care chain didn’t offer Columbia’s doctors a single voting position on a board of directors in the merged institution. Rifka also found Universal’s final purchase offer an insult: $3 million plus the assumption of the debt to the Bank of Tokyo, according to the Sept. 18, 1997 purchase proposal by George Washington and Universal. Columbia’s negotiating committee soundly rejected Universal’s bid. “Yes, the hospital may have to merge,” Rifka acknowledged. “But you cannot merge an entity that no one wants to merge with except for one entity [Universal] that we suspect wants to close us down and make us a parking lot.”
To prepare for a better merger and keep Columbia open under the bankruptcy trustee, the new directors have cut spending. Many of the hospital’s managers, including Chief Executive Officer Gerald Beaulieu, are forced to perform two or three people’s jobs. Nurses also are being cross-trained for multiple assignments. Since June 1997, annual salaries and benefits have fallen from 60 percent to 54 percent of just more than $54 million in revenues, according to Columbia’s June 1998 financial report. The board now contracts with an outside company to manage the hospital’s pharmacy and has renegotiated agreements with doctors to save money. The marketing department expects five new physicians to sign on, bringing their practices.
One contract has not been renegotiated: Dr. Safa Rifka’s. It expired in 1994, but both he and Columbia still abide by its terms. If Rifka’s practice has remained constant, in the fiscal year ended June 1998 his earnings were $1.1 million in a hospital that lost $6 million.
Rifka asserts that the hospital can survive on its own until he finds it a partner. Its expected $6 million in losses during the 1998-99 financial year compare with $17 million in 1997-98, and Rifka insists that the hospital will break even during in 1998-99. “When we came, without any consultants as lay people as we are, as Pap-smear guys as we are, as untrained in hospital administration we found [debts], and we paid our bills,” he asserts. “This is how you manage, not by procrastinating.”
But the conditions that sent Columbia teetering toward bankruptcy have only intensified. A comprehensive KPMG Peat Marwick examination performed in 1996 concluded that Columbia would fail without a merger. Though Rifka and the other doctors have acquiesced in theory to such a partnership, he admits that the hospital has no other suitors. The Wall Street investment firm Rifka courted under the old board has not stepped in to take over Tokyo’s line of credit.
This spring, the area’s HMOs signed contracts with seven hospitals. Columbia was not among them. Worse, Universal and George Washington plan to build a new hospital on the southeast side of Washington Circle just seconds from Columbia. The for-profit chain has no intention of sending its female patients to the community hospital with a century’s experience in women’s health care. Instead, Universal plans to open up an obstetrics/gynecology ward of its own.
Columbia’s admission rate is falling faster than ever. In the 12 months ended in March, admissions fell by 15 percent, according to the District of Columbia Hospital Association. For the month of June alone, they fell by a third. No amount of cost cutting will cure a hospital with empty beds. “This was a power grab,” says Townsend, who now works at Sibley. “Most doctors don’t care. What hurts me more is the hospital is going to shut down. It was the place I was born.”
Art accompanying story in the printed newspaper is not available in this archive: Charles Steck.