The largest freestanding pediatric hospital in Tennessee, Le Bonheur Children's Medical Center of Memphis, has agreed to merge with locally based Methodist Health Systems.
The agreement between Methodist and Le Bonheur Health Systems, the 225-bed hospital's holding company, was announced last week. The deal is a merger of assets, with Methodist assuming about $77 million of Le Bonheur's debt. The transaction is expected to close by Oct. 1.
Le Bonheur had been exploring such an alliance with other systems, including Baptist Memorial Health Care System in Memphis, said Eugene K. Cashman, Le Bonheur's president and chief executive officer. The decision to merge with Methodist was more than six months in the making, Cashman said.
"It just makes sense that in today's era of delivery one works with and within an integrated system," he said. "(Le Bonheur) will have growth opportunities that it wouldn't have if it were out there on its own."
The deal will create a comprehensive regional women's and children's health services initiative. That plan includes expansion of the Le Bonheur Cordova Urgent Care Center and the introduction of Le Bonheur services at 120-bed Methodist Hospital of Germantown, five miles away from the Cordova clinic.
Le Bonheur will develop pediatric services at other sites as the need arises, Cashman said.
The addition of Le Bonheur's services to the Methodist system also will allow the development of pediatric-specific managed-care programs, he said.
For Methodist, "it's not the same as merging with a regular acute-care hospital," Cashman said. Because Methodist did not previously have a pediatric hospital in its system, services are not duplicated in the agreement and neither personnel nor beds will be cut.
Children's hospitals across the country are being pressured to join networks to ensure the viability of their high-cost services, as well as to stave off the effects of state or federal reform efforts that could slash Medi-caid reimbursements.
"What I have concern about is that we would not be as flexible, or able to grow or meet the challenges of what child health needs are going to be in the future" as a stand-alone organization, Cashman said.
Le Bonheur reported revenues of $99.6 million in 1993, according to HCIA, a Baltimore-based healthcare information company.
Methodist, an 11-hospital system with four in Memphis, had net patient revenues of $471 million in 1994, according to MODERN HEALTHCARE's 1995 Multi-unit Providers Survey. The facility closest to Le Bonheur is the system's largest by far, Methodist Hospitals of Memphis, with more than 1,000 beds.