Once again, Cleveland Clinic Foundation has beat rival University Hospitals Health System in a bidding war for a community provider.
This time the prize was Meridia Health System, considered to be among the premier systems in the Cleveland area. Meridia, based in Mayfield Village, Ohio, has four hospitals in eastern Cuyahoga County.
The deal unites eight hospitals and 40% of the inpatient beds in the county.
In August, Cleveland-based Fairview Health System, with two hospitals on the west side, also selected the foundation over UHHS. That followed the merger of the clinic and Marymount Hospital in Garfield Heights, Ohio (See chart).
Meridia decided to merge with Cleveland Clinic this month after deliberating since March. Two for-profit suitors, Nashville, Tenn.-based Columbia/HCA Healthcare Corp. and Wayne, Pa.-based Primary Health Systems, were rejected in July.
"The choice between the two local partners was a difficult one," said Charles Miner, Meridia's president and chief executive officer.
A key feature of the clinic's offer was that Meridia would maintain a "separate and distinct regional identity," Miner said.
UHHS downplayed Meridia's rebuff last week.
"While we are disappointed with the decision of the (Meridia) board of trustees, in no way is that decision critical to the success of our core strategy," said UHHS board Chairman Richard W. Pogue and President and CEO Farah Walters in a statement.
But UHHS proceeded to knock Cleveland Clinic's strategy, calling it "a model of healthcare delivery that relies on bringing entities together to create a monolithic system that uses its size to leverage the market by forcing purchasers of healthcare to buy from a single dominant provider."
A UHHS spokeswoman said the statement did not mean to imply that Cleveland Clinic is creating an illegal monopoly, but rather to point out differences in strategy.
While UHHS has chosen to pursue mergers and not affiliations, the clinic has done both. It's affiliated with about 12 hospitals throughout northeast Ohio through the Cleveland Health Network.
Still, UHHS, which owns a community hospital southeast of the city in Bedford and another to the far east in Geauga County, is trying to expand its network, particularly in the western suburbs. UHHS said it is talking with several area hospitals, including Southwest General Health Center in Middleburg Heights.
The entry of Columbia and PHS into Cleveland in 1994 and 1995 transformed the market from mostly stand-alone hospitals to systems. Now, just six of the 23 hospitals in Cuyahoga County are independent.
The clinic isn't finished with its expansion plans. It also is talking with Lakewood (Ohio) Hospital, a municipal facility west of Cleveland.
A monolithic system isn't necessarily bad in the view of Steve Volla, president and CEO of Primary Health Systems, a for-profit company that owns five hospitals in the market.
"What (the clinic) is creating doesn't preclude competition," Volla said. "It challenges the Cleveland Clinic to be affordable as well as a high-quality provider."
Volla said he wouldn't count UHHS out, given its esteemed clinical reputation and Walters' talented and aggressive leadership. UHHS also has a more extensive network of physician offices than the clinic, he said.
Details have not been worked out, but Miner said he expects Meridia will operate as a subsidiary of the foundation, maintaining its own board and the names of its facilities.
Miner said he expects the merger to attract more patients to Meridia's hospitals and its active staff of about 500 physicians.
"A patient being treated at a Meridia facility would be able to move to the Cleveland Clinic or vice versa without any interruption in the way they are being treated," Miner said.
Cleveland Clinic has laid the groundwork for its mergers by partnering with community hospitals to provide specialty services at their sites. Within the past year, it launched pediatrics, neonatology and radiation oncology services at Meridia facilities.
The merger is expected to be completed by late this year or early 1997.
Meridia consists of 325-bed Meridia Euclid (Ohio) Hospital, 272-bed Meridia Hillcrest in Mayfield Heights, 289-bed Meridia Hillcrest/Huron Hospital in Cleveland and 180-bed Meridia South Pointe Hospital in Warrensville Heights.
In 1995, Meridia reported net income of $11 million on revenues of $359 million and net assets of $215 million.