The seven-year itch has set in a little early at Davis Health System in West Virginia.
Two-hospital Davis, in Elkins, W.Va., merged in March 1999 with one of the state's larger systems, Fairmont-based West Virginia United Health System. At the time, the WVUHS owned two hospitals. Two years later Davis is taking its partner to court to get out of the relationship.
"I think it was fairly typical of most mergers in the country," said Bernie Westfall, president and chief executive officer of the United system. "We felt the hospitals would have more security and be able to generate cost efficiencies over time by being part of a system as opposed to being stand-alone hospitals."
His analysis of what went into the merger two years ago contrasts starkly with what Davis board members are now saying about it.
"(The) WVUHS said it would help us expand patient care, enhance patient services (and was) supposed to give our patients preference in scheduling when we had to send them from Elkins to Morgantown, (W.Va.)," said Sarah Feinberg, a spokeswoman for the Davis board of directors. "We were supposed to retain local control over our decisionmaking processes, and we feel that is being taken away from us."
Davis includes 115-bed Davis Memorial Hospital in Elkins and 72-bed Broaddus Hospital in Philippi, W.Va., as well as two clinics and 12 other healthcare organizations in seven counties. As part of the 1999 merger, the Davis system kept its own board but agreed to become a subsidiary of United, which includes 367-bed United Hospital Center in Clarksburg and 401-bed West Virginia University Hospitals in Morgantown. Four members of Davis' board currently sit on United's board.
The details of Davis' legal complaint and the events leading up to the court filing last week reflect some of the disillusionment that has plagued partnerships that were crafted to cut costs, increase hospitals' leverage against managed-care companies and strengthen relationships with physicians. Culture clashes and impatience with a lack of quick results have caused many systems to split up.
In this case, the problems were compounded when the United board asked an outside law firm to conduct an audit of Davis, forwarded the unfavorable results to federal investigators, relieved the Davis CEO of his duties and called for the resignation of four Davis board members last month. Former Davis CEO Robert "Buc" Hammer II was fired April 5, but the board members have not yet voluntarily resigned.
On May 1, Davis filed its civil complaint against United in the Kanawha County circuit court in Charleston, W.Va. Davis asked to be allowed out of the merger and sought an injunction to prevent United from terminating any of its board members. A hearing has been scheduled for May 9. The complaint argues that the "affiliation agreement" signed in 1999 should be voided because United has not fulfilled various promises, including that each hospital's administration and board of directors would continue to manage its own institution and that each institution would "retain its identity and leadership."
Feinberg said Davis has so far paid $800,000 to United and has yet to see any bang for its buck, which is what led to the request to dissolve the merger. She said the decision was not motivated by the audit or Hammer's dismissal.
Westfall, however, maintained that the merged system has achieved cost savings in areas such as insurance contracts, information technology, supply-chain management and managed-care contracting, but it has been less successful changing clinical practices to reflect a unified standard. He said Davis cannot remove itself from the partnership without the approval of the United board, and the board has not scheduled a meeting on the topic.
"A parent has certain rights over a subsidiary," he said. "That's why a matter of this complexity may have to be settled by the courts."