A consortium of healthcare organizations in eastern Massachusetts is pooling its management expertise and financial capability to keep a suburban Boston acute-care hospital viable in the face of market changes and significant debt.
AtlantiCare Medical Center, a two-hospital system in Lynn, Mass., contracted for management support for its 143-bed Union Hospital facility from a combination of three thriving area players: Bur-lington-based Lahey Hitchcock Clinic, a multispecialty group practice; Woburn-based AdvantageHealth Corp., a major rehabilitation provider in New England; and Beverly (Mass.) Hospital, which is developing a health-network presence in Boston's northern suburbs.
AtlantiCare's operations are still profitable, and the operating margin had improved to 3.6% in 1993 from less than 1% in 1991, according to HCIA, a Baltimore-based healthcare information company.
But at AtlantiCare's annual corporate meeting last month, the 1994 year-end report included a razor-thin operating margin: $146,000 on revenues of $86 million.
The provider still faces a debt of $38.5 million from initiatives hatched in an expansion-minded 1980s market, said spokeswoman MaryAnn O'Connor. And small, independent systems are becoming less viable in the rapidly consolidating Massachusetts market, which has the nation's highest HMO penetration.
AtlantiCare's 18-month management contract is the latest move to preserve acute-care services in Lynn, a town of 80,000 north of Boston. About a year ago, it formally affiliated with Lahey Hitchcock as a way to look for opportunities to combine services and introduce its medical staff to collaboration, O'Connor said.
The medical staff became involved in planning a joint venture among Lahey Hitchcock, AtlantiCare and Beverly to provide radiation therapy services at Lahey Clinic North, which opened last fall in nearby Peabody.
To help reduce debt and concentrate on preserving acute care, AtlantiCareCollaborations
agreed to sell its substance-abuse facility-the former Lynn Hospital-to Beverly, O'Connor said. The sale is pending, and terms haven't been disclosed.
The current management contract, which was announced at AtlantiCare's annual meeting, could result in a merger or acquisition at the end of its term, she said. But for now, the consortium will supply strategic advice on how to consolidate services, reduce costs and revamp Union Hospital for survival.
The consortium also may supply capital for the effort, O'Connor said. Current management will stay in place, tending to day-to-day operations.
Among the proposals under consideration is one to convert 26 beds to sub-acute services, which is a strong suit of AdvantageHealth, she said.
The contract doesn't include cash or other compensation for the managers, but it does give the consortium members access to a new market and positions them as the organizations that helped preserve acute care in Lynn, O'Connor said.