Done deal in N.Y.
After two years, merger sealed between hospitals
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.