Is the cure for one failed hospital merger another hospital merger?
Frick Hospital in Mount Pleasant, Pa., hopes so. Rather than licking its wounds over the May breakup with 87-bed Highlands Hospital in Connellsville, some nine miles away (May 8, p. 2), the 171-bed community hospital is jumping into another merger. Frick blamed that breakup on a clash of cultures between two equal partners that couldn't agree on anything.
This time Frick wants to partner with 345-bed Westmoreland Regional Hospital in Greensburg, about 15 miles away, a facility that Frick thinks suits it better.
But community opposition is mounting. Two borough councils recently passed resolutions opposing the deal, and in the midst of all this, Frick's chief executive officer of 10 years, Rodney Gunderson, last week resigned without any warning or public explanation.
The uproar illustrates how emotional hospital marriages and divorces can be not just for the betrothed, but for their communities.
Frick officials hope to have a final affiliation agreement signed by Oct. 31 and the deal closed by Dec. 31, said Mark Frick, the hospital's chief operating officer.
Frick (whose last name is unrelated to the hospital's name) was promoted from chief financial officer to the newly created COO position after Gunderson resigned Oct. 4.
The community opposition is being led by Frank Santamaria, M.D., chairman of Frick's surgery department. Santamaria said he wants the hospital, which he helped found in 1964, to remain independent.
"They (Westmoreland) are big fish. We are small fish. We want to keep our hospital the way it is," Santamaria said.
Santamaria has taken his case to the Mount Pleasant Borough Council and more recently the Scottdale borough council about five miles away. The majority of both elected bodies voted to send letters to the board of Frick Hospital to urge officials to forget about partnering, he said. He added that he has a majority of Frick's physicians behind him, and more than 800 signatures have been collected from community members.
As with all hospitals in the area, Frick Hospital is a private, not-for-profit organization that isn't legally bound to either borough council.
Frick, the COO, said the ongoing negotiations while an affiliation agreement is drawn up have prevented the hospital from defending its position in the community. But if it wants to survive, the hospital has no choice but to find a financially strong partner.
Frick Hospital had an operating loss of $2.5 million on $39.9 million in operating revenue in the fiscal year ended June 30, and the hospital has identified as much as $25 million in capital improvements that will be needed in the next five years.
Westmoreland is the stronger suitor in the proposed partnership. Until now, it has remained independent. It has posted operating profits for three years running, earning $2.4 million on operating revenue of $109 million in 1999. It also is willing to assume Frick's $11 million in long-term debt, Mark Frick said.
Frick said the affiliation plan with Westmoreland calls for merging the two hospitals under a new parent organization. Westmoreland would hold more than twice as many seats on the parent board, but Frick Hospital representatives will have some reserve powers when crucial decisions are made, COO Frick added.
Saying there are significant differences between the merger that failed and the one on the drawing board, Frick said the hospital is trying to learn from its mistakes.
"We put the (Highland) deal together and thought we could then figure out how to improve things after the fact," Frick said.
Another difference: Fay-West Health System, the system formed by the merger with Highland, was a 50-50 partnership. "Quite frankly, that resulted in a lot of stalemates," Frick said.
Sharing service areas with Highland meant that to save money, services would have to consolidate, "and neither community was ready to do that," Frick added. On the other hand, Westmoreland is close enough to share some efficiencies but far enough away that the hospitals won't be competing for patients, he said.
Joseph Pelluso, president and CEO of Westmoreland, said he can't say why Frick Hospital's last attempt at a merger failed. Westmoreland simply answered a request for proposals first sent out by Frick in December 1998 when it was still merged with Highland.
"We thought it was a good fit," Pelluso said. "I can tell you we are doing our due diligence, trying to develop the right structure, trying to learn some of the pitfalls as to why other mergers come apart."
Michelle Cunningham, CEO of Highland, said even though its former partner now threatens to become a competitor, she wishes both Frick Hospital and Westmoreland well.
"We're mainly just trying to turn ourselves around financially and stay independent," she said. "But I know it's very difficult in healthcare right now. I hope it works out for both their communities."