Hopkins, Helix are discussing alliance Merger would account for nearly a quarter of acute hospital beds

September 30, 1997|By David Folkenflik and M. William Salganik | David Folkenflik and M. William Salganik,SUN STAFF

The state's two largest hospital systems -- the Johns Hopkins Medical Institutions and the Helix Health System -- are in negotiations that could yield a merger of their operations, or at least a $1 billion-plus alliance that would dominate the Maryland health care industry.

The sides have not yet reached any agreement on how to unify their distinctly different cultures, several people familiar with the negotiations said. But talks that once had a tentative tone have recently picked up steam, they said.

"The coming together of these two health systems is something both these organizations are trying to do," said one person with direct knowledge of the talks.

Dr. Edward D. Miller, the medical czar who oversees the vaunted Hopkins medical complex in East Baltimore, said that it would be premature to say the two systems would merge or even ultimately coordinate their businesses. Hopkins has engaged in serious talks with many hospitals in the region since Miller took his post last winter, he said.

"We've had major talks with almost everybody -- GW [George Washington University], the University of Pennsylvania, Sinai, Helix," Miller said. "We've talked with for-profit [hospitals], not-for-profits. And all these conversations are serious. We literally don't have time not to negotiate seriously with everybody."

James A. Oakey, Helix's president and chief executive officer, said only that he is conducting discussions with "a whole host of people." He declined to comment on any negotiations with Hopkins.

Several observers in Maryland's health care industry said they expect a shakeout that would result in three or four major networks that dominate the landscape.

"We've expected this all along," said Dr. Robert A. Barish, head of UniversityCare, the University of Maryland's arm that negotiates deals with health care providers. "Most people feel that the health care marketplace is going to undergo further consolidation."

If Hopkins and Helix were to combine, they would account for nearly one-quarter of all Maryland's acute hospital beds and more than one-quarter of the state's hospital revenue. Patients could be routed among many of the Hopkins-Helix hospitals, clinics and other facilities based on how sick they are and how much their care would cost at each place.

"Hopefully, that would be a good thing," Dr. Dana H. Frank, an assistant professor of medicine at Hopkins who is president of a physicians care network called Flagship Health, said of the prospect of a Hopkins-Helix alliance. "This is a tough time for academic medical centers."

As HMOs and other managed care plans have grown, providers of health care have been consolidating rapidly to win and manage contracts with the new insurance behemoths. The insurers like to negotiate with organizations that can provide all phases of care. And with managed care companies demanding lower costs, hospitals are seeking contracts with insurers that will improve profits by allowing them to provide care in the least expensive setting.

In Maryland, nearly three-quarters of all hospitals have merged or joined in alliances that do group purchasing and contracting.

Nationally, academic medical centers such as Hopkins and the University of Maryland have busily been acquiring community hospitals, nursing homes, physician practices and home health agencies, assuring a flow of patients for specialty care and giving the expensive teaching hospitals lower-cost settings to care for patients.

When he was provost of the University of Minnesota's Academic Health Center, Dr. William R. Brody, now Miller's boss as president of the Johns Hopkins University, negotiated the merger of the center's 500-bed hospital into the Fairview Health System, with seven hospitals, 26 clinics and 500 doctors.

"The purpose is more than acquiring hospitals or practices to feed the parent," said Dr. Paul Griner, vice president of the Association of American Medical Colleges and head of its Center for the Assessment and Management of Change in Academic Medicine. "It's to put together a system that makes the most sense in caring for the patient."

But while merger explorations are frequent among hospitals and other health providers, talks don't always end in a deal. For example, Anne Arundel Medical Center and North Arundel Hospital conducted a very public courtship but broke up last year without announcing an alliance.

At Hopkins, any such arrangement would require a delicate absorption of Helix hospitals and physicians into the fold without roiling medical professors who conduct the leading research and perform the cutting-edge procedures that have helped to build the Hopkins name.

But university trustees created the dean and CEO position, held by Miller, to signal that they would have one person ultimately responsible for reconciling financial realities with academic tradition. And that has helped to accelerate talks like those currently being held between Hopkins and Helix.

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