H ealth care continues to become an ever-larger industry — by some estimates now accounting for more than a fifth of our nation’s economy. In this environment, growth is a prescription for survival. Sometimes that growth comes organically — a hospital or other provider opening new offices or adding new services to accommodate demand. And sometimes it’s strategic, as in one health system acquiring or partnering with another to gain added clout or fend off competitors.
Two decades ago, the Lebanon-based Dartmouth-Hitchcock system signed a joint operating agreement with Keene’s Cheshire Medical Center. With increasing costs, a heavy overlap in patients and adjoining sites on Court Street, it seemed to make sense as a way to keep costs down and provide services more efficiently. Several years ago Cheshire Medical, struggling to maintain its profit margin, went looking for a partner that could help it deal with changing industry dynamics, rising costs and diminishing reimbursement rates. That partner, to no one’s surprise, was Dartmouth-Hitchcock.
In 2014, the Keene hospital was acquired by the Dartmouth-Hitchcock system — don’t be fooled by protestations that Cheshire has its own board and is therefore independent; all major decisions must be approved in Lebanon. The move ought to be deemed a success; in 2016 and 2017, Cheshire’s bottom line was millions of dollars in the red, a situation Dartmouth-Hitchcock covered.
Now, Dartmouth-Hitchcock, which controls five hospitals plus other clinics and specialty offices throughout the Connecticut River Valley, is planning to expand again, by affiliating with GraniteOne Health, which runs Catholic Medical Center and two smaller hospitals — including Peterborough’s Monadnock Community Hospital.
Again, the two partners are adamant about the look of the deal. They want it to be called “combining,” noting the two organizations, which will be run by Dartmouth-Hitchcock CEO Joanne Conroy, will still have separate boards. Of course, they’ll actually be overseen by one new board, on which Dartmouth-Hitchcock will seat nine of the 15 members. But nonprofit hospitals are wary of terms like “merger” or “acquisition,” which sound corporate. The truth is, nonprofit or not, they’re businesses, and very large ones at that. Cheshire Medical is one of, if not the, biggest employer(s) in Keene, and is just a part of this giant system. How giant? Well, if approved by the two organization’s boards, plus state and federal agencies, the deal would put more than a third of the state’s 26 hospitals under one umbrella.
That does raise some questions and concerns.
The potential benefits could include: uniformity in the approach to care among providers over a large swath of the state and parts of Vermont; increased size and clout that might allow the system to obtain better rates and prices with insurers, vendors and others; and synergy in record-keeping and other areas that may make it easier for patients who are referred between facilities.
On the other hand, a lack of competition is generally bad for consumers. A New York Times analysis in November found the cost of hospital stays rose dramatically in areas where hospitals merged. And adding more bureaucracy — more boards, more executives, etc., means there’s a better chance for bloat and inefficiency in the whole operation. There’s also the chance, despite executives talking around it at the moment, that combining the two systems will result in overlap that will cost some workers their jobs.
All of this is very preliminary, but needs to be pondered.
When Cheshire Medical was about to be absorbed by Dartmouth-Hitchcock five years ago, we asked a top executive at the Keene hospital about the downsides of an ever-growing regional health care system. “How big would be too big?” we asked. “I don’t know,” he answered.
We may be getting closer to finding out.