A merger never fully consummated is partly to blame for the financial ills ailing two-hospital Intracoastal Health Systems in West Palm Beach, Fla.
That's one of the diagnoses made by Cambio Health Solutions, the turnaround firm Intracoastal hired in January to help reverse its fortunes.
"The original vision of the merger-to create a single operating entity-has never adequately been realized," according to a Feb. 22 memorandum from Intracoastal summarizing Cambio's findings. "We are now paying the price of not integrating our campuses."
Created in 1994, Intracoastal's hospitals are 460-bed St. Mary's Medical Center and 341-bed Good Samaritan Medical Center. They are the two largest hospitals in West Palm Beach, according to the American Hospital Association guide. Both hospitals are part of Catholic Health East, a 31-hospital system headquartered in Newtown Square, Pa.
Difficulty with integration has been the death knell for other mergers, including Harrisburg, Pa.-based Penn State Geisinger Health System and UCSF Stanford Health Care in San Francisco.
Another Florida system, five-hospital Baptist St. Vincent's in Jacksonville, recently announced it would split into two smaller systems because its large size didn't foster flexibility (See story, below).
But there's no plan to split up Intracoastal, said Steve Nathan, a Cambio senior manager who is acting as interim chief executive officer overseeing the operations of Intracoastal's hospitals.
Cambio has been at Intracoastal since January. Cambio is the turnaround arm of Quorum Health Resources, a subsidiary of Brentwood, Tenn.-based Quorum Health Group.
Nathan said Intracoastal can be fixed.
"Volume and market share have been steady and [Intracoastal] has both money and time to overcome their current problems," according to the memo of Cambio's findings.
In addition to integration troubles, Intracoastal also is struggling with losses from its owned physician practices and with managed-care contracts "with inadequate reimbursement and late payments," according to the memo.
Though Good Samaritan was able to eke out a $613,501 profit for the fiscal year ended June 30, 1999, St. Mary's wasn't as lucky.
The hospital lost more than $13 million for the same period, according to financial information from the Florida Agency for Health Care Administration. A consolidated financial statement for Intracoastal was unavailable.
Cambio's turnaround plan calls for Intracoastal to break even within the next 12 months. Intracoastal will save $31 million to $38 million if, among things, it:
* Decreases managed-care discounts.
* Renegotiates physician contracts or sells practices back to physicians.
* Reduces staff and reorganizes management.
At a Feb. 14 meeting of Intracoastal's board with Cambio representatives, Phillip Dutcher, Intracoastal's president and CEO, "expressed his desire to resign from his position," according to a press release. Dutcher has neither formally submitted his resignation nor has the board accepted it, a spokeswoman said. Dutcher was unavailable for comment.