The two largest hospitals in Lubbock, Texas, agreed to merge, less than a month after the president and chief executive officer of the largest system stepped down.
Lubbock Methodist Hospital System and St. Mary Hospital signed a letter of intent to pursue merger talks. The merged system would be called Methodist/St. Mary Health System and would have annual revenues of more than $350 million. Charley O. Trimble, St. Mary's president and CEO, will retain his title at the newly merged system.
The announcement followed the resignation last month of William Poteet, who had been Methodist's president for 10 years and was last year's chairman of the Texas Hospital Association.
However, in an interview last week with MODERN HEALTHCARE, Trimble said Poteet's resignation was not related to the merger announcement. "This is strictly a coincidence," Trimble said, adding that Poteet was "supportive of the concept" of a merger.
Even so, events at Lubbock Methodist have caused observers to wonder about the large medical system, which had grown by leaps and bounds in the West Texas plains. Under Poteet's leadership, Lubbock Methodist swelled from a single hospital to a system that includes 635-bed Methodist Hospital, 50-bed Methodist Children's Hospital, nine area hospitals that are sponsored or managed by the system, 40 rural hospitals that also have affiliations to Lubbock Methodist, and 10 rural health clinics.
During the 1990s, Lubbock Methodist embarked on a $100 million expansion, adding tertiary-care services and capacity. For example, the new six-story Methodist Heart Center claims to be the only hospital in the country to staff on-site, board-certified interventional cardiologists 24 hours a day.
However, as the system expanded, so did its debt load. Liabilities in 1995 totaled $270 million, which rivals some of the largest hospitals in Dallas and Houston.
Even so, its flagship hospital remained profitable, although net income slipped 42% in 1995 to $10.2 million on revenues of $233.6 million.
Just before Christmas, the system's chief operating officer, Paul Schilder, resigned. His position was subsequently eliminated.
Then, when Poteet, 50, resigned last month "to pursue other healthcare opportunities," observers wondered what was triggering the shake-up.
However, in an interview with MODERN HEALTHCARE, Poteet said he was ready to become a private consultant. About Schilder, he said: "when he made his step, I realized that's what I wanted to do, too."
The merged hospitals would have about 75% of the inpatient beds in Lubbock, but Trimble said the systems' attorney doesn't expect the deal to run afoul of regulators. "You have to look at state competition rather than micro-analyze competition here," he said.
Head-to-head competition with Lubbock Methodist resulted in expensive duplication in the community, he noted. Merging the two systems will be a benefit, Trimble added.
Meanwhile, St. Mary dropped out of bidding to partner with University Medical Center, the other large hospital in Lubbock. The 277-bed public hospital issued a request for proposals from potential partners or lessees and received four proposals that board members were reviewing last week.
With St. Mary dropping out, the remaining bidders are all investor-owned systems: Columbia/HCA Healthcare Corp., Universal Health Services and OrNda HealthCorp.