Three hospital-based healthcare organizations in southeast Massachusetts merged their assets last week into a unified health system, staking territory between the rapidly consolidating markets of Boston and Providence, R.I.
The new Southcoast Health System is a consolidation of Charlton Health System in Fall River, St. Luke's Health Care System in New Bedford and Tobey Health Systems in Wareham.
The three organizations had combined 1995 revenues of $319 million. Combined assets totaled $341 million.
In addition, the three hospitals merged into a single subsidiary under common management. Southcoast Hospitals Group comprises 344-bed Charlton Memorial Hospital, 390-bed St. Luke's Hospital of New Bedford and 60-bed Tobey Hospital. Charlton Memorial's president, Ronald B. Goodspeed, M.D., was named president of the hospitals group and executive vice president of the health system.
A dozen other subsidiaries round out a continuum of care, from primary to home and nursing care.
Charlton and St. Luke's both were looking outside the area for partnerships prior to signing a letter of intent in August 1995 to explore an affiliation, said John B. Day, new president of Southcoast Health System and former president of St. Luke's Hospital.
Options included joining developing networks in Boston and Providence, as well as joining Columbia/HCA Healthcare Corp., which recently entered the Massachusetts market with an 80% share of MetroWest Medical Center in west suburban Boston.
But in the final analysis, "it made sense to go back to what our missions and purpose were in the first place," and that was "to meet local needs first before making decisions on networks outside the region," Day said.
Tobey Hospital joined the talks in September, and the hospitals reached a definitive agreement to merge assets by year-end (Dec. 18, 1995, p. 4). The three hospitals, separated by 16 miles each, were not competitors, "and that made it even more natural for us," Day said.
Community-based hospitals and physicians have been scrambling to organize networks south of Boston, where the region's biggest healthcare networks are the least entrenched.
Southcoast's new network, centered about 60 miles south of Boston, is just beyond the territorial lines drawn by a new physician-led healthcare network called Primary Care (May 20, p. 49).
With Charlton hugging the Rhode Island border in Fall River, the network is in closer competitive proximity to Providence, home of Lifespan, a healthcare system that includes Rhode Island Hospital and Miriam Hospital. Southcoast includes eastern Rhode Island in its service area.
Negotiations between Columbia and Roger Williams Medical Center in Providence may increase the stakes. Fran Driscoll, senior vice president for external affairs at the 150-bed hospital, said, "We have been talking intensely as of late, but we do not have a signed letter of intent." Driscoll emphasized that the institution is "not closing any options right now, and we're talking to others as well."
The Providence institution has the financial results Columbia looks for, earning $3.6 million in fiscal 1995 even after racking up $5.2 million in charity care and uncollectible charges, on operating income of $100 million. It recently expanded into subacute care and a range of long-term-care arrangements for senior citizens.
Charlton Memorial earned $7.8 million on operating revenues of $120 million in 1995, an operating profit margin of 6.5%, according to HCIA, a Baltimore-based healthcare information company.
St. Luke's earned $16.5 million in 1994 on operating revenues of $144 million, for an operating margin of 11.4%, according to the latest figures available from HCIA.
Tobey Hospital lost $766,000 in 1995 on operating revenues of $26 million, according to HCIA.