Putting the finishing touches on a long-running and sometimes bumpy courtship, Summit Medical Center in Oakland, Calif., expects to present its board of directors with a definitive agreement to merge with Sutter Health hospital system by mid-November.
Summit is the largest independent private hospital left in the Bay Area acute-care market. Most hospitals in the region have long since joined forces with leading systems such as Sutter, Catholic Healthcare West, Columbia/HCA Healthcare Corp. or Tenet Healthcare Corp.
"We're refining and completing the definitive agreement, and it's on track to be presented to the (relevant) boards in November," said Nancy Happel, a spokeswoman for the 420-bed hospital.
The boards in question include those representing Summit, Sacramento, Calif.-based Sutter and Alta Bates Medical Center, a Berkeley, Calif., Sutter affiliate that would effectively merge with Summit if an affiliation with Sutter is completed.
Several committees, representing board members, senior managers and physicians, are reviewing how the proposed merger can be structured, including elements such as medical staff integration and operating strategy, Happel said.
Officials had hoped to hammer out a definitive agreement by late August, but sources said conflicts over Alta Bates' role in the merger and the integration of the two medical staffs stalled the process.
In mid-August Happel said the negotiating parties had just "a few t's to cross and i's to dot." At the time, officials at Sutter, who hope to make Summit the 27th acute-care facility in their $2.7 billion system, agreed with that timetable.
Summit lost about $220,000 for the fiscal year ending Feb. 28, on revenues of $214 million. It made a profit of $4.4 million the prior year.
The merger would link Summit, near downtown Oakland, with fierce rival Alta Bates to form a two-headed giant that would dominate acute care along much of the San Francisco Bay's eastern shoreline. But local healthcare unions and some competitors have said the proposed merger should get intensive antitrust review.
Kaiser Permanente, the other dominant provider in the inner East Bay market, is already sending its maternity patients in the area to 555-bed Alta Bates, as part of the projected closure next year of its aging 344-bed Oakland Medical Center. Kaiser also signed an agreement in early April to send about 120 adult acute-care and emergency-care patients a day to Summit beginning in the first quarter of 1999.
As a result of those deals, a combination of Summit and Alta Bates could come close to monopolizing acute care in the region, critics said.
Chuck Idelson, a spokesman for the California Nurses Association, said cutbacks at Summit and the planned closure of Kaiser's Oakland facility-with the loss of many union jobs-"(are) a prescription for disaster" because they would exacerbate an existing shortage of emergency and acute-care services in the inner East Bay (July 20, p. 36).
Hospital consultant Wanda Jones, president of San Francisco's New Century Healthcare Institute, acknowledged that the combination could have some anti-competitive implications, given the strong reputations of Summit and Alta Bates. But she predicted the merger will sail through the regulatory process.
Officials at Summit and Sutter also downplayed antitrust concerns, and said opponents have overstated the clout of the merged organization.
It's too soon to tell how regulators will view the situation. Executives at both Summit and Sutter said federal and state officials will not even begin looking at the proposed merger until a definitive agreement is signed. Both sides expect to file for Hart-Scott-Rodino antitrust clearance by federal regulators later this fall and anticipate gaining approval to proceed with the merger by year-end.
The Federal Trade Commission and state regulators will review the agreement to determine if it creates an anti-competitive consolidation of market clout in the area.
"As of this point, there's nothing for them to look into," said Bill Gleeson, a Sutter spokesman.
The proposed merger, announced in late March, would link Summit and Alta Bates under a joint 23-member board of directors. Officials say the combination would give Alta Bates and Summit more clout in negotiations with HMOs and other insurers, save money on purchasing of supplies and services, and help create a more coordinated clinical network in the region.
Many observers expect Sutter to appoint a joint chief executive officer for the hospitals. The joint CEO is likely to be Summit CEO Irwin Hansen. Alta Bates' CEO George Caralis abruptly resigned his post in mid-July. Caralis, 50, stepped down just two days after announcing his resignation to rejoin his family in Michigan. He was promoted to the CEO slot at Alta Bates in April, following the resignation of longtime CEO Albert Greene.
"That leaves the door open for Irwin," said Steve McDermott, executive director of Hill Physicians Medical Group, a major East Bay independent practice association with close ties to Summit.