Unlike diamonds, mergers aren't forever. Two recent de-mergers remind today's dealmakers that what seems logical when a deal is being consummated might not look as good six or seven years later. Mergers can founder on issues such as corporate culture and a desire for independence, or, once the conditions that led to the merger have changed, collaboration may not look like such a great deal.
Halifax Hospital Medical Center, Daytona Beach, Fla., decided last month not to continue to pursue a reluctant partner (June 28, p. 4). The public hospital district formed a partnership with another district, South Volusia Hospital District, in 1997 to centrally manage the districts' two hospitals-Halifax Medical Center and Bert Fish Medical Center, New Smyrna Beach, Fla. The partnership oversaw functions such as human resources, purchasing, security and marketing, but not clinical integration.
In October 1999, the two hospital districts began negotiating a management agreement. Halifax decided to give up after 41/2 years of negotiating. "The management agreement has continued to be a sticking point," Halifax spokesman John Evans said when the split was announced. South Volusia Chairman Fred Cooper said in a news release he was surprised by Halifax's decision, but that the partnership had been good for South Volusia.
When three-hospital St. Elizabeth Medical Center, Covington, Ky., joined Catholic Healthcare Partners in 1998 the Medicare cuts approved by the Balanced Budget Act of 1997 were just starting to hit. When St. Elizabeth decided to leave last month, Joseph Gross, the system's president and chief executive officer, said in a news release that its exit was "simply a business judgment."
The merger road has long been filled with high-profile marriages that ended in divorce. Some of them include: Tufts-New England Medical Center in Boston leaving Lifespan Corp., Providence, R.I., in 2002; University of California San Francisco Medical Center and Stanford University Health Services bitterly splitting after just two years together in 1999; and the divorce of Geisinger Health System, Danville, Pa., and Penn State University Hospital-Milton S. Hershey Medical Center, Hershey, Pa., also in 1999.