Done deal in N.Y.

Af­ter two years, merger sealed be­tween hos­pi­tals

Modern Healthcare - - REGIONAL NEWS - Ashok Selvam

Hos­pi­tals merg­ers sel­dom are sim­ple when only two par­ties are in­volved, but in up­state New York it took two years to seal a four-hos­pi­tal merger in­volv­ing two Catholic par­ent or­ga­ni­za­tions with a third sec­u­lar group.

Ex­ec­u­tives, for one thing, faced the chal­lenge of in­te­grat­ing two sec­u­lar hos­pi­tals with those gov­erned by the Ro­man Catholic doc­trine, a hur­dle now at is­sue in the closely-watched $620 mil­lion pro­posed merger be­tween Univer­sity of Louisville Hos­pi­tal and two branches of Den­ver-based Catholic Health Ini­tia­tives (June 20, p. 6).

“What we did, frankly, was not all that creative,” said Steve Boyle, CEO of the new­ly­formed St. Peter’s Health Part­ners. Boyle will, at least tem­po­rar­ily, con­tinue his role as pres­i­dent and CEO of 487-bed St. Peter’s Hos­pi­tal in Al­bany, N.Y. The deal, first an­nounced with a mem­o­ran­dum of un­der­stand­ing in 2009, in­volved As­cen­sion Health of St. Louis, whose Se­ton Health divi­sion op­er­ated 175-bed St. Mary’s Hos­pi­tal in Troy, N.Y. Catholic Health East, New­town Square, Pa., brought St. Peter’s Hos­pi­tal to the ta­ble, while sec­u­lar North­east Health joined the merger with 238-bed Sa­mar­i­tan Hos­pi­tal in Troy, N.Y., and 165-bed Al­bany Me­mo­rial Hos­pi­tal.

The new or­ga­ni­za­tion is con­sid­ered sec­u­lar, but North­east still agreed to fol­low the tenets set forth by the Ro­man Catholic Church. That meant the end of re­pro­duc­tive ser­vices at their fa­cil­i­ties. But ad­min­is­tra­tors con­tin­ued to con­verse with lo­cal of­fi­cials, as well as The Merg­er­Watch Project, a New York City-based national watch­dog group that scru­ti­nizes hos­pi­tal merg­ers, hop­ing to pro­tect the of­fer­ing of re­pro­duc­tive ser­vices. That di­a­logue proved fruit­ful.

“Ini­tially there were con­cerns from Planned Par­ent­hood and Merg­er­Watch, and we re­ally spent a lot of time with them on that part,” said Dr. James Reed, pres­i­dent of the merged sys­tem and pres­i­dent and CEO of North­east Health. “But in the end they helped us an­tic­i­pate is­sues … we were pleased, given the model that we came up with.”

The com­pro­mise that en­sued took about a year to de­velop, Reed said. St. Peter’s al­lowed a new firm to form and oper­ate a 20-bed ma­ter­nity wing on the sec­ond floor of Sa­mar­i­tan Hos­pi­tal. The Bur­dett Care Cen­ter won’t of­fer abor­tions, but will of­fer coun­sel­ing ser­vices and ster­il­iza­tions. They’ll han­dle about 1,200 births a year.

Merger Watch counts the cre­ation of Bur­dett as a vic­tory, call­ing it a “smart com­pro­mise” on its web­site and some­thing worth em­u­lat­ing na­tion­wide. The group asked Reed and Boyle to talk to of­fi­cials in­volved in the pend­ing Louisville deal with the hope a sim­i­lar so­lu­tion could reached. Boyle said that hasn’t hap­pened.

Rec­on­cil­ing the Catholic di­rec­tives wasn’t the only fac­tor slow­ing the deal. The area is left with one com­peti­tor, 628-bed Al­bany Med­i­cal Cen­ter, and that placed the deal un­der close an­titrust scrutiny by the Fed­eral Trade Com­mis­sion. The FTC closed its in­ves­ti­ga­tion into the merger in April.“It was a long process and part of that rea­son is this was a three-way, a three-party op­posed to a twoparty deal,” Boyle said. Of­fi­cials said in­te­grat­ing the four hos­pi­tals could take three years as they nur­ture a new cor­po­rate cul­ture, up­date com­puter sys­tems and shift staff to im­prove ef­fi­ciency. There’s a loom­ing ques­tion of lay­offs that could elim­i­nate re­dun­dan­cies, but of­fi­cials said the re­duc­tions would be larger if the merger never hap­pened.

The new en­tity will em­ploy more than 11,700 across more than 125 lo­ca­tions, and of­fi­cials es­ti­mate an an­nual bud­get of about $ 1.1 bil­lion. Boyle stressed the merger doesn’t only in­clude the four hos­pi­tals, men­tion­ing its Eddy sys­tem of con­tin­u­ing care as a valu­able as­set in the trans­ac­tion. Boyle said the va­ri­ety of ser­vices al­lows St. Peter’s flex­i­bil­ity as health­care de­liv­ery shifts, pos­si­bly to­ward be­com­ing an ac­count­able care or­ga­ni­za­tion.

“If, for some rea­son, ACOs don’t work for us, we will still pur­sue the clin­i­cal-in­te­grated net­work and work with pay­ers,” Reed said. “The im­por­tant thing is we will still meet the spirit of the model which is hav­ing a ser­vice or­ga­ni­za­tion across the con­tin­uum and be­ing able to work with pay­ers.”

Steve Boyle, left, and Dr. James Reed, sec­ond from left, are sur­rounded by board mem­bers and the se­nior man­age­ment team of the newly merged St. Peter’s Health Part­ners.

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