BEDFORD, INDIANA

By ADAM COHEN

Hospital care in Bedford, Ind., is an odd case of capitalism in action--maybe even hyperaction. Should you get into a car wreck on Highway 50 as it passes through town, two local hospitals can send ambulances to compete for your business. If you are sufficiently alert, you can choose between Dunn Memorial Hospital and Bedford Regional Medical Center. To avoid unseemly tugs of war, the city requires that the hospitals alternate pickups of victims not well enough to state a preference. And the police are on hand to sort things out. "They'll back off when it's not their turn," Bedford chief of police Bill Haverly says matter-of-factly. "There's never been a real fight as far as I can remember."

All the same, competition to deliver medical care in Bedford can get fairly heated. When the two hospitals aren't squabbling over roadside opportunities, they are engaged in a larger struggle for the sick and elderly in this town of 15,000. Their philosophies are at opposite extremes of today's health-care debate. Bedford Regional has eagerly embraced managed care and linked itself to a statewide hospital chain. County-owned Dunn is sticking to an almost Norman Rockwell vision of traditional health care. The hospital war being waged nationally is taking place here in microcosm; it is at institutions like Dunn that traditional medicine may be making its last stand.

Bedford is a torpid southern Indiana stone-quarry hamlet where the politics are dull, racial disputes are rare, and crime is so infrequent that Mayor John Williams boasts that his home has no lock on the front door. But bring up hospital loyalties--an allegiance some Bedford families have solemnly passed down for three generations--and townspeople are likely to get agitated. "You don't get the care you need there," 86-year-old Martha Terrell, a Dunn patient of 50 years' standing, says of the institution she won't patronize. "Whenever anyone new moves to town, I tell them to be sure to come to Dunn."

There is broad agreement in Bedford that a merger would make sense. Services at the two hospitals overlap, and beds go empty. A study predicted that by 2001 Bedford will need only 65 beds, 95 fewer than it has now. "Those numbers are probably going to drive where we go with this whole thing," says John Birdzell, CEO of Bedford Regional. Dunn's CEO, Richard Hahn, does not disagree. "There's been a consensus that one hospital would be a good goal to strive for," he says. But over the past 15 years, four attempts to merge have failed when the two sides could not agree on whether the new hospital would tilt toward a group practice of salaried doctors or the classic system of independent ones. At Dunn, doctors are all self-employed and work for patients on a fee-for-service basis. "The worst thing that has happened in medicine is the HMO," says Dr. Lawrence Benham, a grandfatherly 84-year-old in his 47th year of practice at Dunn. "There are 30 people standing around a pile of money, and what they don't spend at the end of the year they get to split with the CEO." Dunn makes a point of not rushing patients out the door. The average length of stay for a normal birth is two days, compared with 1.3 at Bedford Regional. And the stay is also longer at Dunn for conditions like heart failure and shock, atherosclerosis and diabetes.

Dunn doctors boast that they are not tied to the controversial drug "formularies" used in managed-care to rein in doctors' drug choices. Cardiologist Ganapathy Ramanathan says he regularly prescribes a very expensive heart-attack drug called TPA, at thousands of dollars a dose, rather than the drug streptokinase, which is available for a fraction of the cost but has been found less effective in some studies. "I'm sure the hospital has lost a lot of money on many of my patients, but they've never told me about it," he says. Dunn contends it is more willing to refer patients to expensive specialists. Dr. Theresa Travis, a Dunn nephrologist who spends about 20% of her time at Bedford Regional, says she often sees patients with traditional insurance months ahead of HMO patients with similar conditions. "Managed-care patients are always referred very late," she says, in some cases making kidney failure more likely.

As a result, health care is costlier at Dunn: the average charge for heart-failure and shock treatment is $7,892, for example, compared with Bedford Regional's $4,817. But Bedford Regional, which gets about a quarter of its revenue from managed care, vigorously disputes the notion that its treatment style is any less effective. "Just because you can stay twice as long at Dunn doesn't mean it's better health care," Birdzell says. He adds that Bedford Regional's drug-selection policies are not cost-driven. It prescribes both TPA and streptokinase, for instance, depending on the specifics of the patient's condition. As for specialists, Bedford Regional says its HMO patients see them when appropriate, even though their use is carefully monitored. Actually, Bedford Regional argues, its more modern approach can be better. For example, the hospital is starting up a teleradiology laboratory that takes advantage of the fact that it is owned by Clarion, a statewide hospital network. Radiologists will be able to send images to colleagues in Indianapolis, drawing on greater expertise than is usually found in a small town.

But Bedford's strongest argument is that the whole nation is moving in its direction: critics say Dunn has been able to snub managed care only because Indiana has been among the states slowest to require it. Its economic good fortune will change, they say, when the two automobile companies with large plants in Bedford start requiring employees to shift to managed care and when Medicaid and Medicare begin pushing recipients into HMOs. At that point, if Dunn is to survive, it may have to sell out to a large for-profit chain. Should that happen, Bedford's medical civil war will simply rage on with even greater firepower.