CONFLICT SEEN IN DOCTORS OWNING HOSPITAL : COLUMBIA/HCA HEALTHCARE OFFERS PHYSICIANS INVESTMENT DEALS THAT MAKE THEM WORKING PARTNERS.

Byline: Martin Gottlieb and Kurt Eichenwald The New York Times

The offer made Dr. Richard Rubinson uneasy. Shortly after the Columbia Hospital Corp. took control of the Miami hospital in 1993 where he had long practiced, the company gave him and other doctors the chance to buy up to 20 percent of the institution by investing up to $150,000 each. As investors, the company explained, the physicians would share in the hospital's financial risks and rewards.

Such investment offers are common in American industry. Yet to Rubinson, the former president of the Dade County Medical Society, medicine is not just any industry. He feared that his interests as an investor might conflict with his duty as a doctor to act in the best interests of patients. Columbia's investment deals, he felt, gave doctors ``the implicit understanding that the more patients there were, the more the return on your little piece would be.''

It was, the 60-year-old thoracic surgeon said, ``a message I just didn't want to respond to.'' He declined Columbia's offer.

In the last few years, several thousand doctors have been offered such investments by Columbia, now known as the Columbia/HCA Healthcare Corp., the nation's largest health care company, with about 350 hospitals and hundreds of other medical facilities. Some, like Rubinson, have begged off. Many others have not.

Hospitals, of course, have long recruited doctors with generous enticements - like signing bonuses, consulting contracts and outright purchases of their practices. For Columbia, able to bring vast wealth to the courting game, these deals have been instrumental in the drive to dominate medical marketplaces.

But because their financial returns are tied directly to those of their hospitals, the doctor-investors are stepping into different and, to many health care experts, troubling territory. Not only do they raise the kind of ethical issues that so worried Rubinson; some of the investments are raising legal questions as well.

In recent months, Columbia's financial relationships with its doctors have come under heightened legal scrutiny. The federal agency that runs Medicare is examining whether Columbia doctor-investors are violating a federal conflict-of-interest law when they send patients to services like home care that are operated through hospitals where they have stakes. Many of the investors in El Paso were served with search warrants as part of a federal inquiry involving the company. And a doctor who invested in a Columbia partnership in Texas has sued the company, saying that some of its deals with physicians violate the law.

To examine the investments' effects, The New York Times analyzed referral patterns of 62 doctors in the Miami area. Since Columbia does not make partnership records public, the study was based on limited information. But it showed that after investing, the doctors as a group referred more patients than before to Columbia hospitals and fewer to competing hospitals. Columbia called the study flawed and said investments did not influence admissions.

Though a handful of far smaller companies also offer doctors investments, Columbia has used them from its inception and is their most forceful proponent. After putting a hold on such plans for several years, while absorbing hundreds of new acquisitions, Columbia has started to offer them again.

Bringing doctors on as investors, the company's executives say, is nothing more than an effort at smoothing the often-fractious relationship between hospitals and physicians. They say the investments give doctors an identification with the company's mission. This, they say, leads to savings - because the investors are thus more prone to listen to reasonable plans for economies - and to improvements in care that come through the cooperation with the hospital that is needed in the era of managed care.

``We believe that physician integration is best achieved if we - Columbia and doctors - have a common vision of our future and share in governance, risk, reward and ownership,'' said Dr. Frank M. Houser, president of Columbia Physician Services.

Questions raised

But many medical professionals look at this new doctor-hospital relationship and come away asking questions like these:

With hospital administrators pressing to cut costs, will doctors with investments acquiesce more easily to cuts in nursing care and other services? With hospitals increasingly forced to accept fixed payments for care, no matter how much they actually spend to provide it, will doctors shrink more readily from ordering medically beneficial but costly tests and treatments?

And will the investments influence where doctors send patients? Especially, will they tend to refer patients who cannot pay, and others with costly cases, to hospitals where they do not have a stake and refer the more profitable ones to their investment hospitals? And will they tend to send patients to outside medical services in which the company has a stake, even if such treatment is not medically necessary or could be provided more effectively elsewhere?

Some of these issues are akin to ones faced by the far larger, and steadily growing, number of physicians who receive fixed payments for managed care patients and so have an incentive to limit treatment.

In interviews, many doctor investors said the investments had no effect on the way they treated patients.

``The thing that drives physicians on where they send people is where they can get their best care,'' said Dr. Magdalena Averhoff, an investor in Columbia Cedars Medical Center in Miami who is on the company's national board.

Doctors' support

But in a brief written in support of the Texas doctor's lawsuit against Columbia, three of the country's most prominent physicians argue that by their nature, the investments confound a doctor's loyalties.

The investments, along with other incentives, ``take physicians into uncharted waters, where conflicts of interest abound and the separation between business and professional aims is obscured,'' wrote the doctors, C. Everett Koop, the former surgeon general; Arnold S. Relman, former editor of The New England Journal of Medicine; and James S. Todd, former executive vice president of the American Medical Association.

``No longer are physicians the trustees solely for their patients' interests,'' they wrote. ``They become in addition agents for a corporate enterprise which regards patients as customers.''