Two systems, two different merger paths

To merge or not to merge.

That was the question pondered by two separate healthcare systems at the Healthcare Financial Management Association's ANI conference in Las Vegas last week.

Martha Jefferson Health System in Charlottesville, Va., decided to take the plunge. The two-hospital Cape Cod Health System in Hyannis, Mass., decided to stay put.

According to the CEOs of both systems, they were difficult decisions to make.

The discussion of mergers was particularly salient at the ANI conference, as such transactions have been heating up, and the U.S. Supreme Court has recently agreed to hear a case regarding the Federal Trade Commission's jurisdiction in local mergers, Dow Jones reported.

Martha Jefferson recently opened a new facility. "When we opened the doors of the new hospital, we wanted to be as strong as possible," said Martha Jefferson CEO Jim Haden. "Could we be a better hospital with the right partner?"

By contrast, Cape Cod had been losing money servicing a relatively low-income area while also feeling pressure from providers in Boston. Strength mattered less than retaining its legacy, according to CEO Mike Lauf.
"So much of the process we couldn't control," Lauf said. "Who would help us stay local, and meet the needs of the community?"

Fit was everything to Haden. "It's absolutely important," he said, noting that shared goals to improve the community and a vision for the future also were important.

One suitor was prepared to give Martha Jefferson everything its board sought. However, there was one catch that doomed the deal. "Their risk tolerance was much higher than ours," Haden said.

Eventually, the system decided to partner with Sentara Healthcare.

"They have an excellent attitude and a good brand, but they didn't want to impose it on us," Haden said.

Ultimately, no one fit Cape Cod's requirements, according to Lauf. "Those we wanted to partner with would not have allowed us any control. It would have put us in a subordinate position, and we would have lost out philanthropic channel" he said. "There was no compelling reason to go forward."

However, Lauf believes the emergence of accountable care organizations has dramatically changed the landscape and could make the merger terrain more negotiable down the line.

For more:
- here's the Martha Jefferson announcement about its merger with Sentara
- read the Dow Jones Newswire article about the Supreme Court case