This town isn't big enough for the two of them-not even after the hospitals formed a joint operating agreement to streamline services and cut costs.
So 264-bed St. Joseph's Hospital in Asheville, N.C., is selling out to its partner, 436-bed Memorial Mission Medical Center, for $90 million.
The recent announcement has left physicians in Asheville wondering whether the deal will mean better care at lower costs or a showdown between them and the combined hospitals (May 25, p. 16).
"If this one system takes hold, there could be such an arrogant independence produced that physicians and patients will be the losers," said Donald Russell, M.D., president of the Buncombe County Medical Society in Asheville. "That's the fear, although we have no concrete evidence that will happen."
That fear has stalked physicians since St. Joseph's and Memorial Mission, the only two private, acute-care hospitals in Asheville, formed their virtual merger in 1995.
The hospitals started talking about forming a partnership in 1993. That year, they lobbied for and won an expansion of the state's antitrust exemption law to include mergers and partnerships. Under the law, such deals are exempt from antitrust scrutiny if they provide tangible benefits to the community, such as improving the quality of care.
The hospitals were required to generate at least $74.2 million in efficiencies and savings over the first five years of the partnership-one of many concessions they made to win a certificate of public advantage from the state.
Physicians are concerned the sale could give Mission St. Joseph's, the joint operating company, the power to shut them out of lucrative partnerships and contracts with the system's 75,000-enrollee PPO.
Sparks already are flying. Some surgeons have caused an uproar by forming a partnership with Mission St. Joseph's to open a freestanding surgery center. Not all surgeons were invited to participate in the deal, Russell said.
"Those who want to be freestanding physicians could have a problem," Russell said. "There's a lot of nervousness and uncertainty, but there is some optimism as well."
When the partnership was formed in 1995, the two hospitals indicated in a number of statements, press releases and published reports that mismatched ownership barred a merger (April 17, 1995, p. 26).
The Sisters of Mercy of North Carolina decided to sell St. Joseph's, the last Roman Catholic hospital in the state, because the order had decided to change its mission from providing acute care to meeting broader community health needs, the order said in a statement.
The Sisters of Mercy sold its Charlotte-based Mercy Health Services to Carolinas HealthCare System for $115 million three years ago.
Another motive for the sale of St. Joseph's might be the cash-strapped hospital couldn't compete with Memorial Mission's high-tech equipment and deep pockets. St. Joseph's lost $3 million in 1997, the Asheville Citizen-Times reported. The growing managed-care presence in the area likely added to St. Joseph's woes.
"There were economic reasons and forces that put St. Joseph's in a position where they felt they had to play (with Memorial Mission)," he added.
Some physicians saw an outright sale coming down the pipeline, Russell said.
"It was in the back of our minds when the cooperative undertaking was done," said John Stevens, chairman of the 17-member board that runs Mission St. Joseph's. "The documents contemplated a formula in the event that (a sale) should occur."
The proposed sale also casts a cloud over scores of jobs as Mission St. Joseph's looks to trim its work force.
The system has been offering early retirement and voluntary severance packages to a number of employees to try to cut staff without layoffs. Some positions also have been eliminated through attrition, a system spokeswoman said.
The staff cutbacks would have occurred without the sale, Stevens said.
Despite an apprehensive air among some physicians, Mission St. Joseph's officials said the community seems to be positive about the sale.
System President Bob Burgin said Mission St. Joseph's expects to meet its savings goal two years early. The system has boasted low rates compared with the rest of North Carolina, said Norman Cosper, vice president of institutional network management for Blue Cross and Blue Shield of North Carolina. "That's an achievement the hospitals can be proud of," Cosper said.
"We're supportive of any initiative that lowers healthcare costs and doesn't harm the quality of care," Cosper said. "However, we have yet to see any evidence that hospital mergers actually lower healthcare costs."
Mission St. Joseph's will seek approval for the deal from the U.S. Justice Department and the state attorney general's office. The system likely will need to amend its certificate of public advantage, which it obtained under the antitrust exemption law, Stevens and Burgin said.
The hospitals would not say whether such amendments would loosen the state's requirements for the system. They agreed to the state's original terms in December 1995 after three weeks of trying to amend the proposal (Feb. 12, 1996, p. 30).