War of the Wards

Phoenix Children's Hospital, for years hidden inside Good Samaritan hospital, seems to have been misplaced by the federal government

Stamp sent New Times a 1984 letter indicating HCFA was aware of the situation, but says he did not share it with Caldwell last week.


From its start as a 71-bed "hospital in a hospital," Phoenix Children's has grown to occupy 219 beds on the Good Samaritan campus at 11th Street and McDowell. As the only Arizona hospital caring exclusively for kids, Phoenix Children's staff admitted nearly 9,500 patients last year and performed more than 2,000 operations. In its outpatient clinics in Mesa, Phoenix, Scottsdale and Glendale, Phoenix Children's treated an additional 35,000 children. Stamp says the hospital's occupancy rate of about 75 percent is one of the highest in the state and at the top of children's hospitals in the country.

Phoenix Children's blends physically with Good Sam, occupying the fourth and eighth floors as well as some surgical space on the third floor. Signs in front of the hospital and the emergency room feature "Phoenix Children's Hospital" directly beneath "Good Samaritan." Even a page on the hospital's Web site admits it's tricky to figure out where it is.

"Finding Phoenix Children's Hospital isn't easy," the site says, then describes how since 1983, it has leased floors at Good Sam. Phoenix Children's contracts with Good Sam for key hospital services, including billing, laboratory, radiology, surgery and pharmacy services. Financial reports from the last three years show Phoenix Children's has paid an average of $40 million a year to Good Sam's parent company (from annual revenues averaging $127 million) for what they call "ancillary services."

Phoenix Children's arrangement with Good Sam, although it was lauded at the time, was supposed to be temporary. The hospital's goal from the beginning has been to become independent. Over the years, while hopes were heightened and then dashed, alliances forged and broken, Phoenix Children's continued to hold onto that goal. It also continued to raise money toward that end, through the annual Children's Miracle Network telethon as well as other fund-raising events. Stamp says the hospital now has more than $100 million on hand dedicated to opening its own facility.

The goal of finally getting a freestanding children's hospital is "far closer than ever," Stamp says, adding that final details are being worked out. Backing a new facility are nearly all of the 225 doctors in the Greater Phoenix Pediatric Consortium, as well as Maricopa Medical Center and Samaritan. St. Joseph's is not on board, but communication lines are still open, officials say. Insiders say Phoenix Children's is leaning toward buying and renovating the Columbia HCA hospital at 20th Street and Thomas.

Supporters of an independent children's hospital in Phoenix and others are puzzled by the sudden scrutiny of Phoenix Children's and its organizational structure. Why, they wonder, are issues that have not changed for 16 years suddenly being questioned by HCFA?

Political intrigue and speculation aside, the official explanation goes like this: When a Phoenix Children's surgeon sliced open the abdomen of an 8-year-old boy due for removal of a neck tumor last summer, someone complained to the state. It turned out to be a case of lax identification procedures -- the surgeon and others thought the boy was a 5-year-old due to have a cyst removed from his gallbladder. The Division of Assurance and Licensure Services of the Department of Health Services checked out the complaint and found a number of procedural deficiencies. Phoenix Children's responded with a plan of correction, implemented safeguards to help prevent such a mix-up from occurring again and was given a clean bill of health in November 1998.

But during that inquiry, state investigators raised questions about Phoenix Children's license as a general hospital, including "specifically, the absence of various services such a [sic] nursing, surgical, dietetic, emergency, medical records, laboratory, pharmacy, and radiology services which are not directly provided by PCH." Reports from the summer 1998 investigation got forwarded to HCFA and first alerted authorities to a possible problem with Phoenix Children's Hospital. A DHS licensing program manager, who no longer works for DHS, told a reporter last year the questions were surfacing because such a serious investigation had not been undertaken before.

"That's bull," says Dr. Cloud. The retired pediatric surgeon and former head of the American Medical Association says the initial on-site investigations of Phoenix Children's were incredibly thorough. And he says PCH was just as careful about meeting all the required criteria.

"DHS at first opposed our license for political reasons," he says. "Other forces didn't want Phoenix Children's Hospital to develop. So we overcame that by dotting every 'i' and crossing every 't,' which made it impossible for them not to grant us the license."

Dan Green, vice president of communications at Samaritan, says officials there have been kept abreast of HCFA's concerns about Phoenix Children's relationship with Good Sam. And the CEO of Samaritan traveled to San Francisco for last week's meeting.

He said the issue of sharing the Medicare number with Phoenix Children's Hospital was sanctioned in 1983 and 1984 by authorities. Green says the sudden suspicion about the whole arrangement is "a little bit of a mystery."

Others interviewed by New Times expressed confusion about what was going on with HCFA and Phoenix Children's. Many had heard something was up, but didn't know what it entailed. Some were puzzled by the secrecy about the controversy; although Phoenix Children's and HCFA have been wrestling with the issue since January, there have been no public statements or publicity about the discussions. Even Dr. Richard Reznick, head of the pediatric consortium working toward seeing a children's hospital become a reality, says he doesn't know details about the discussions between the feds and Phoenix Children's.

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