Memorial Healthcare System and Hermann Hospital plan to form the largest not-for-profit healthcare system in the Houston area with more than $1 billion in assets.
The two announced last week that they signed a memorandum of understanding after six months of merger discussions. Memorial also had been talking with two other teaching hospitals located in the prestigious Texas Medical Center.
"The only time frame we're looking at for this to be completed is the end of the summer," said Memorial spokeswoman Caroline Osmon.
The deal faces due-diligence review and the usual federal antitrust scrutiny. Both processes should be completed by the end of the summer, executives said.
But they are uncertain how long Texas Attorney General Dan Morales will take to review the deal. The state's top law-enforcement agency is insisting that once-scandal-ridden Hermann abide by its charitable mission and provide certain levels of charity care (May 19, p. 16).
"He's not done yet," Osmon said. "It looks like it would be a fairly smooth ride, but it's still too early to tell."
Hermann has engineered a comeback since its scandals of the mid-1980s. Then, a former trustee and two former hospital administrators were indicted on charges of financial wrongdoing at a $400 million trust fund that administered and financed the hospital. But 655-bed Hermann since has pulled off a financial turnaround, and it appeared last year in a listing of the nation's top 100 hospitals based on measurements of financial management, operations and clinical practices (Dec. 9, 1996, p. 52).
With $950 million in annual net revenues, the merged organization would be the closest not-for-profit rival in size to investor-owned Columbia/HCA Healthcare Corp. in Houston. Nashville-based Columbia has 17 hospitals in its greater Houston division.
Memorial owns six hospitals and has a contract to manage another hospital in the Houston area for a total of 1,425 beds.
The organizations have preliminarily settled leadership issues, which derail many mergers among not-for-profit systems. Dan Wilford, Memorial's president and CEO, will hold the same position at the new organization, while David Page, Hermann's president and CEO, will be chief operating officer of the merged organization.
Memorial posted net income of $30 million on net revenues of $531.9 million in 1996. It had $683.9 million in assets.
Hermann reported net income of $54.5 million on net revenues of $418.3 million in 1995, the latest year for which financial information was available from HCIA, a Baltimore-based healthcare information company. It has $416 million in assets.