It's just a 250-bed community hospital in a town north of Boston, but it figured into expansion plans by four healthcare systems elbowing one another in Massachusetts.
Last week the Lynn hospital chose the system next door, spurning out-of-state offers from the two largest for-profit chains as well as from another local system down the road that had been making itself at home in town.
The board of AtlantiCare Medical Center decided to sell its Union Hospital in Lynn to not-for-profit North Shore Medical Center, which includes Salem (Mass.) Hospital, North Shore Children's Hospital and several other specialty facilities.
North Shore agreed to guarantee AtlantiCare's $38 million in debt and also guarantee to keep Union Hospital open as an acute-care facility for at least five years.
Runner-up in the bidding was Tenet Healthcare Corp., which had offered $43 million. Columbia/HCA Healthcare Corp. also bid an undisclosed amount, and both for-profit companies pledged to set up a community foundation.
Pulling out at the last minute was Northeast Health Systems, a Beverly, Mass.-based two-hospital system on metropolitan Boston's North Shore that had taken on AtlantiCare as a project two years ago when it was struggling to operate two facilities.
Northeast Health bought one facility, the former Lynn Hospital, which had been converted to a behavioral health facility but was losing $300,000 a month at one-third capacity, said Robert Fanning, Northeast's president. Operations were moved to a smaller, more efficient building nearby, he said.
Northeast also forged a loose affiliation that included assistance in materials management, re-engineering and development of an information systems plan, Fanning said.
But as AtlantiCare edged back into profitability, officials there weren't satisfied with movement toward a more formal affiliation, said spokesman Fred Cole. "Negotiations broke down to the point where the board just decided maybe we should just go out and see what we could find."
The four finalists made their pitches at a public hearing two weeks ago as well as to groups of physicians and employees. The hearing uncovered community opposition to for-profits, including complaints about Columbia related to recent investigative actions by federal officials, Cole said.
By contrast, North Shore was "a local outfit, we know what they've done, we're pleased with it," he said. And unlike Northeast Health, North Shore is "not just two community hospitals joining together but the strength of partners joining with the local community hospitals."
The ties between Salem Hospital and Lynn already are close. There's a 90% overlap of physician staff between the Salem and Union facilities, and Salem Hospital actually is closer to downtown Lynn than Union is, said North Shore spokeswoman Bonnie Kaplan. Salem Hospital also admits more patients from Lynn than from Salem, she said.
The physician overlap complicated Northeast Health's effort to satisfy AtlantiCare's requirement that the winning bidder provide a debt guarantee, Fanning said.
Because 62% of Union Hospital's discharges came from physicians also on the staff of Salem Hospital, Northeast Health concluded it couldn't control the fiscal practices of physicians enough to guarantee Union's debt, he said.
The system attempted to cover that base by bringing in CareGroup, another regional healthcare network, as a partner about five weeks before the board's decision deadline.
But the two systems couldn't iron out their own relationship in time, said Mitchell Rabkin, M.D., chief executive officer of CareGroup, which includes Beth Israel Deaconess Medical Center and five other area hospitals.
The competition for AtlantiCare is the latest contest for turf on the North Shore between two systems that nearly merged in 1993. The plans collapsed when a steering committee could not pick between Fanning and North Shore's Michael Geaney for the CEO post.
Northeast Health first hopscotched Salem and into Lynn in 1991 when the grass-roots Lynn Community Health Center invited Beverly Hospital to recruit physicians and train midwives, Fanning said.