Viewpoint
Finding a Solution: Two Small Hospitals Finally Come Together
By Mary Ellen Poe
Several years ago, an article ("High Noon for Community Mission, July/ August 1998)," in Trustee told of two small hospitals contemplating a merger. Because they couldn't agree on the details, each affiliated with larger systems located miles away, leaving both local hospitals allied with geographically distant major health care systems that competed vigorously and expensively.
As a result, the local community faced "high noon" as the hospitals battled for supremacy. The losers were the residents who supported both institutions. This scenario echoed past experiences and foretold the possible future of the two small Pennsylvania hospitals--Gnaden Huetten Memorial Hospital (GHMH) in Lehighton and Palmerton (Pa.) Hospital.
GHMH is a 111-bed facility with a 91-bed nursing home. Palmerton has 70 beds and an assisted living facility under construction. The hospitals are located only seven miles apart and for many years have vied for the same patient base.
Since 1964, the hospitals have attempted to affiliate at least eight times, and each time the attempt failed. But now, after 40 years of trying, the two hospitals have joined together to create the Blue Mountain Health System, which became effective July 1, 2004. What was different this time?
We began with many meetings of the two board chairs, leading to a dinner meeting of both boards' executive committees. We recognized that since the hospitals had attempted to merge at least eight times before, there must be something inherently good and right about it. We acknowledged the presence of distrust, misperceptions and maybe even a little animosity. We talked about intense sports rivalries and how members of each board were born or raised in each town. We found common ground by asking ourselves these questions:
- Is our mission to serve everyone in our service area?
- Should health care in our service area be governed locally?
- Will we be able to continue to stand alone, or do we believe that a merger or affiliation will make us stronger? How?
- Can we bury the past and start anew?
Positive answers to these questions resulted in a dinner meeting of both full boards in June 2003. Donald Creamer, former CEO of the Susquehanna Health System in Williamsport, Pa., prepared us for what lay ahead by walking us through his experience in forming the Susquehanna Health System. That was the catalyst. We formed a leadership committee comprising both board chairs and two at-large board members. The committee engaged Creamer as its facilitator.
Over the next month, Creamer interviewed 29 trustees, seven medical staff leaders and eight senior managers to determine if a consensus existed or could be built around key issues. This included listing obvious services for consolidation, services that simply could not be consolidated, medical staff concerns (e.g., the potential for interference with their referral patterns), employee concerns, and potential positive and negative outcomes of a merger. At the conclusion of the interviews, we had 11 reasons why we should establish our Partnership for Better Health Care:
1. To strengthen participating organizations
2. To eliminate waste/duplication
3. To improve quality through a systemwide quality program and through increased volume, which will give clinicians more opportunity to treat patients with complex conditions
4. To increase access to health care services by attracting more physicians
5. To expand the scope of services
6. To maintain local control over health care decisions
7. To enhance community health
8. To make a positive impact on public policy
9. To provide an efficient integrated delivery system to payers/customers
10. To achieve synergy for more countywide cooperation
11. To survive.
This time we didn't haggle over who would be the CEO or what services would go where. We kept our eye on our mission to serve the people of our area in the best possible way. We agreed on a 50/50 board composition, and that if the CEO was selected from one hospital, the board chair would come from the other. We agreed to provide emergency and basic acute medical-surgical services on each campus. Everything else would be open for consideration based on patient origin, facilities, service opportunities and other factors.
We hired legal and financial counsel, and we also considered organizational structure and patient origin by ZIP code.
We were not without naysayers. A few board members believed that an affiliation with a larger hospital would be better, but in December 2003 the boards of both hospitals overwhelmingly approved a Memorandum of Understanding outlining the framework for the new entity.
Communication was of the utmost concern. The day after the Memorandum of Understanding was signed, meetings were held with both medical staffs, all employees and community leaders to thoroughly explain the affiliation before it was announced to the media. There was apprehension, but overall the partnership met with approval and even some excitement. The community also approved of the new venture.
The leadership committee was expanded to include the 16 individuals who had been selected for the new Blue Mountain Health System Board of Directors. Then the real work began: developing articles of incorporation, a system agreement, bylaws, individual hospital bylaw revisions, regulatory and facility due diligence, third-party notifications, consent of the Pennsylvania Attorney General Charitable Assets Division and Antitrust Division--a 10-page checklist.
The time and paperwork to accomplish all of this was staggering.
CEO selection had been a deal breaker in former affiliation attempts, but this time, prospective CEOs submitted resumes and were interviewed by a selection committee. At the February leadership committee meeting, the Gnaden Huetten CEO was selected to lead the new system and, per our agreement, the Palmerton Hospital board chair was elected to chair the system board.
The task that lies ahead for the CEO is daunting. Perhaps his biggest challenge will be to gain the trust of Palmerton Hospital employees--he is an unknown to them and for legal reasons could not enter their hospital until last July.
None of this was easy. We overcame many challenges, and we anticipate many more along the way. But we hope we have avoided "high noon" for the citizens we serve, and that we will be able to turn our $4 million in projected savings into needed health services for our community that neither hospital could have provided alone.
Mary Ellen Poe is immediate past chair of Gnaden Huetten Memorial Hospital, Lehighton, Pa., and secretary of the Blue Mountain Health System board.
This article 1st appeared in the December 2099 issue of Trustee Magazine.
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