After 19 months of trying to hammer out a joint operating agreement, two of Nashville, Tenn.'s largest not-for-profit hospitals called it quits last week.
Parting ways were 646-bed Vanderbilt University Medical Center and 571-bed Saint Thomas Hospital. Combined, the two represent about 40% of Nashville's staffed hospital beds.
In a joint statement, the hospitals offered no specific reason for the split, saying, "We have concluded that a joint operating agreement simply does not align our interests and serve the needs of the region sufficiently to proceed with a JOA at this time."
Spokesmen for the hospitals said comments were confined to the statement, and they declined to answer any additional questions.
A growing number of hospitals have called off mergers, acquisitions and partnerships in recent months after rushing into the industry consolidation craze (Jan. 1, p. 54). The reasons cited most often for the failed deals include disagreements over control and chief executives.
Perhaps contributing to the inability of Vanderbilt and Saint Thomas to work things out was their vastly different financial performance.
In 1994, the latest year for which data were available from the Tennessee health department, Saint Thomas posted a 12.7% profit margin, earning $31.3 million on total net revenues of $246.9 million. Vanderbilt had a 2.7% profit margin, earning $9 million on total net revenues of $335.6 million.
The breakup brings the relationship between the two hospitals full circle. They had informal research and teaching ties for years, but in March 1994 began discussing the development of a joint-provider network. At that time, they said a merger was off the table.
But nine months later the hospitals agreed to pursue a joint operating agreement, under which the hospitals would maintain their separate ownership and assets but would be operated as a single organization by one board and one chief executive.