Two hospitals in the middle of the consolidating market in eastern Massachusetts have paired up to design their own integrated network just north of Boston.
Cambridge (Mass.) Hospital Community Health Network, a municipal facility, and not-for-profit Somerville Hospital have agreed to merge their organizations. The structure of the consolidation is still under discussion.
Central to the merger plans is the conversion of Cambridge to a public authority, which would give it wider contracting latitude under state law and allow it to mingle money from other communities, said Carl Zack, Somerville's president.
For Somerville, the merger decision ends an affiliation with St. Elizabeth's Medical Center of Boston that dates to October 1993.
That affiliation had concentrated on filling out the medical-staff needs of Somerville and providing specialty services in areas such as obstetrics, Zack said.
But the geographic and demographic fit was better with Cambridge's adjacent service area, Zack said. Cambridge's need to change its governing status was considered too much of an obstacle two years ago, but city officials "are more interested in facilitating that" than they were when competitive pressures weren't as apparent, he said.
Since then, HMO penetration in the Boston area has risen past 50%, and large networks have formed around such prominent teaching institutions as Massachusetts General Hospital, New England Deaconess Hospital and Boston University Medical Center.
Somerville had identified the need to be merged into a larger organization in 1987, Zack said. "From my office window I can see seven hospitals," he said. But discussions with other hospitals went nowhere until a few years ago, he added.
The proposed new organization also combines a 170-bed long-term-care facility and six neighborhood health centers operated by Cambridge with three health centers run by Somerville.
St. Elizabeth's, a major academic medical center for Tufts University medical school, still anticipates a tertiary relationship with Somerville in areas such as cardiology, said spokesman Richard Doherty. He acknowledged that Somerville and Cambridge had much in common as community-based facilities a mile apart.
The two organizations serve diverse ethnic groups and economic classes and share "the challenge of remaining financially viable in this very tumultuous and competitive healthcare climate without compromising our commitment to our communities," Zack said.
Somerville lost money the past two years while Cambridge barely showed a profit, according to HCIA, a Baltimore-based healthcare information company.
Somerville's net loss was $2.4 million in 1994 on net patient revenues of $30 million. In 1993, its net loss was $4.2 million on $27 million in revenues.
Cambridge posted net income of $471,000 in 1994 on net patient revenues of $61.4 million. In 1993, its net income was $381,000 on $45.7 million in revenues, according to HCIA.