As expected, two Houston hospital giants, Methodist Hospital and St. Luke's Episcopal Hospital, last week signed a letter of intent to merge.
The merger would combine the hospitals, located across the street from each other, into a 1,763-bed system that would rival Houston's two largest systems-Memorial Healthcare System and Columbia/HCA Healthcare Corp.
The merger also seems to signal the end of an era for Methodist's president and chief executive officer, Larry Mathis, a sometimes controversial industry leader who was elected 1993 chairman of the American Hospital Association.
Under Mr. Mathis' leadership, Methodist took on a $150 million expansion in the late 1980s to make Methodist the nation's largest hospital, with 1,527 inpatient beds. His philosophy and business acumen so embodied the spirit of the giant hospital that people sometimes referred to it as "Mathodist."
However, that building spree and Mr. Mathis' staunch refusal to take managed-care contracts led the Wall Street Journal last year to label him a healthcare "troglodyte" who was out of step with the rest of the industry.
Mr. Mathis is perhaps best known in Texas for his unwavering stance in a lawsuit filed in 1991 by the state attorney general. The suit contended the not-for-profit hospital was not providing enough charity care to justify its tax-exempt status. The lawsuit was won by Methodist, but the dispute prompted the state Legislature to pass a new law requiring not-for-profit hospitals to provide specific levels of charity care (March 8, 1993, p. 26).
Mr. Mathis last week declined interviews in the wake of the proposed merger announcement. However, the joint press release issued by the hospitals said that a new chief executive officer for the combined hospitals would be recruited. Mr. Mathis and St. Luke's CEO, John Burdine, M.D., will serve as vice chairmen of the new system "for an agreed-upon period of time," the news release said.
Late last year, Methodist began formulating a managed-care strategy and reducing its 7,000-employee work force. In August, the hospital announced plans to lay off 600 employees by the end of the year, its second major work force reduction in two years.
In 1993, Methodist Hospital System reported $20 million in net operating income on net patient revenues of $585.6 million, according to MODERN HEALTHCARE's Multi-unit Providers Survey. The system reported assets of $1.3 billion.
St. Luke's declined to provide any financial data.