Two hospitals in Joplin, Mo., have agreed to merge after talks of collaboration with the city's third hospital ended when it decided to add an obstetrics unit.
The two merging facilities, 167-bed Freeman Hospital and 91-bed Oak Hill Hospital, provide services for the 2,700 births each year in Joplin. The city's third hospital, 329-bed St. John's Regional Medical Center, stopped providing obstetrical services in 1976.
In December, the three hospitals were near agreement to build a network to jointly operate some services, said Kelby Krabbenhoft, Freeman's president and chief executive officer. Then, St. John's announced it planned to build a $500,000 obstetrics unit, and the negotiations fell apart.
The results included cries of outrage from administrators and a bitter certificate-of-need battle over St. John's unit.
Last week, Freeman and Oak Hill said they would merge to form Health SouthWest Alliance of Missouri. The alliance also will include 67-bed Freeman Neosho (Mo.) Hospital. The facilities have combined revenues of $108.2 million.
The hospitals control about 44% of the staffed beds in Joplin. They will file pre-merger notification documents with federal authorities in June.
"What happened was most unfortunate," Mr. Krabbenhoft said. "We had invested a lot of time in a process to rationalize healthcare in our community. Obstetrics was understood as a rationalized core service. They told us over and over they were not getting into obstetrics. This was a breach of trust."
Meanwhile, St. John's executives said they didn't trust Freeman and Oak Hill to provide obstetrics services when needed. Negotiations last summer with one preferred provider organization drove home that point, said Jon Kramer, St. John's chief financial officer. After contracting with St. John's for most services, the PPO couldn't negotiate a favorable obstetrics contract elsewhere, which led one business partner to leave the venture, Mr. Kramer said.
"The writing was on the wall," he said. "I'm not aware that we ever said we wouldn't do OB, although there was talk. We're trying to negotiate contracts with managed-care providers. Not having a basic service like obstetrics puts us at a severe disadvantage."
St. John's will build its obstetrics unit regardless of the CON battle's outcome, Mr. Kramer said. The unit's budget is below the minimum for state regulation, but Freeman and Oak Hill argue that, in reality, it will cost more. A meeting with state regulators is scheduled for this week.