Proving that hospital breakups come in many sizes, two small hospitals in southwest Pennsylvania have called it quits, just like their big-city cousins.
Frick Hospital, a 171-bed facility in Mount Pleasant, and 87-bed Highlands Hospital in nearby Connellsville ended their nearly three-year partnership last week and immediately began operating as separate businesses.
Since 1997, the two had been jointly operated as the Fay-West Health System, based in Mount Pleasant, some 25 miles southeast of Pittsburgh.
System divorce is a growing trend as more hospitals end their strained merger marriages or choose to break off courtships before a deal is consummated (April 24, p. 2). They're finding it difficult to achieve the promised benefits of consolidation and collaboration.
The demise of the relationship between Frick and Highlands proves these splits aren't happening just to high-profile healthcare systems like UCSF Stanford Health Care in San Francisco or Penn State Geisinger Health System in Harrisburg, Pa.
"We're a classic case of why marriages in the healthcare community do not work," said Marcy Ozorow-ski, president of the American Federation of State, County and Municipal Employees local that represents 125 workers at Highlands. "We did not have the same mission, vision and values."
Or the same governance.
Rather than consolidating management as in a true asset merger, the hospitals formed a joint operating agreement with a parent board overseeing their operations.
Both hospitals retained separate governing boards, said Rod Gunderson, Frick's chief executive officer and the former Fay-West CEO.
"That planted the seeds of destruction," Gunderson said.
Highlands' board dragged its feet when it came to consolidating services to reduce duplicative expenses, said Gunderson, who added that it was Frick that called off the hospitals' partnership. "We were in gridlock."
Michelle Cunningham, chief operating officer of Highlands, declined to talk in detail about the system's failures.
"It didn't work," she said. "We went together with good intentions. It just didn't work, and Highlands is ready to move forward."
One of the main failures was on the financial end, as Frick lost $854,000 in fiscal 1998 on net patient revenue of $18.1 million, according to HCIA-Sachs, a Baltimore-based healthcare information company. In the fiscal year ended June 30, 1999, the system lost $500,000, according to Gunderson. Also in 1999, Highlands lost $401,000, Gunderson said. He did not give 1999 revenue figures for either hospital.
The initial plan to come together may have been a good one, he said, but the execution was poor. Some consolidation has occurred, Gunderson added, noting that 27 management positions were trimmed from the system.
"I think there was a lack of consistent vision of what had to happen when," he said.
Gunderson said Frick wants to affiliate with the Greensburg, Pa.-based Westmoreland Health System, which includes 345-bed Westmoreland Regional Hospital in Greensburg. Before its dissolution, Fay-West had been exploring a partnership with Westmoreland.
Frick and Westmoreland Regional are two of the six acute-care hospitals in Westmoreland County.
As for a new partner for Highlands, Cunningham said it's too soon to tell.
"Maybe down the road," she said.