Two hospitals in Peoria, Ill., dissolved their healthcare network after being unable to decide how acute-care services would be allocated between the two campuses.
One year after federal agencies gave them clearance to control 50% of their market, the board of directors at 346-bed Methodist Medical Center of Illinois unanimously agreed to withdraw from an affiliation agreement with 185-bed Proctor Hospital.
Early last year both the U.S. Justice Department and Federal Trade Commission said they would not challenge the affiliation. The hospitals' affiliation agreement was completed two months ago.
"Methodist wanted to do a full-asset merger, but we couldn't come to an agreement on the consolidation plan so we decided to withdraw from the agreement," said James Knoble, president of Methodist.
Methodist cited a consultant's report that said acute-care services would better be combined at the Methodist campus. "Analyses of other options, including using the Proctor campus exclusively for a cardiovascular center of excellence, revealed few opportunities for the level of savings anticipated by the community leaders who supported the merger," a Methodist statement said.
Both hospitals said the affiliation would save $15 million annually.
Proctor executives said they, too, were prepared to eventually merge, but not right away. Proctor executives were informed of Methodist's decision after its Jan. 31 monthly board meeting.
A merger "was a possibility on both sides some time down the line," said Frank Bussone, president of Proctor Health Care Foundation. "We were disappointed because the affiliation was in the best interest of the community."
The agreement to affiliate formed Community Healthcare Network, rivaling Peoria's largest and only other acute-care hospital, 560-bed St. Francis Medical Center.
The breakup also comes some six months after Knoble was hired as Methodist's top executive. Knoble, returning to Methodist as hospital president after leaving that post in 1988, replaced Robert Wierman, who had accepted the network's No. 2 position as president and chief operating officer.
Proctor President and CEO Norman LaConte was chairman and CEO of the network. LaConte was unavailable for comment.
Combined, Proctor and Methodist had $290 million in assets in 1994, the latest year for which financial information was available from HCIA, a Baltimore-based healthcare information company. The facilities had nearly $215 million in 1994 revenues.
Both hospitals said they are keeping their future affiliation options open. "It's a little early to say what we will do," Proctor's Bussone said.
Methodist said it plans to join a larger healthcare system outside of Peoria.