Hospital merger talks 'intense' Hopkins, Helix silent but are called anxious to reconcile 'cultures'

'Real marquee value'

Health care

October 30, 1997|By M. William Salganik and Diana K. Sugg | M. William Salganik and Diana K. Sugg,SUN STAFF

The Johns Hopkins and Helix health systems have reached a serious stage in talks that could lead to a merger of the state's two largest hospital systems.

"These organizations recognize the need to come together, and both are working very hard at accomplishing it," said one source familiar with the negotiations. Another described the talks as "intense," and said both sides are anxious to bring off a deal, but it still could founder over details.

Officials of both institutions, who acknowledged that they have discussed mergers and other affiliations with a variety of potential partners, declined comment on the talks' progress.

If the merger is concluded, it would create a system controlling roughly a quarter of the hospital beds in the state and incorporating clinics, physician groups, rehabilitation centers and other facilities. It would also be structured to preserve Hopkins' teaching, research and faculty clinical practices, said several people with knowledge of the discussions.

"We'd be dealing with a much more formidable entity," said Elizabeth Misek, chief executive officer of Prudential HealthCare of the Mid-Atlantic, one of the largest health maintenance organizations in the region. "They would command enormous market share and enormous negotiating clout."

"It's going to be a 1,600-pound woolly burger or Tasmanian devil. We think now that Hopkins and Helix each are sort of 800-pound gorillas, and they both carry a lot of clout," said Dr. Bill Howard, a surgeon at Union Memorial, one of the Helix hospitals. "Clearly, other people will have to respond to it one way or the other."

The other Helix hospitals are Franklin Square in White Marsh and three others that, like Union Memorial, are in Baltimore: Church, Good Samaritan and Harbor. In addition to Johns Hopkins Hospital, Hopkins also runs Johns Hopkins Bayview Medical Center.

The talks, sources said, are not only focusing on issues of money and power, but also on how to successfully blend the "cultures" of the venerable Hopkins, with its worldwide reputation for teaching and research, and Helix, which in the past few years has assembled a system of five community hospitals that rivals Hopkins in size, but is more focused on patient care.

At arms' length

"On many issues you see Helix and Hopkins arguing on opposite sides, so how do these opposites get together? Where do they find central ground?" said Dr. Martin P. Wasserman, state health secretary. "It would make more sense to me to see them dancing at arms' length before I'd see them in a clutch."

Yet the two health systems, which may have seemed an odd couple in the recent past, are being brought together by the perceived need to assemble "integrated health systems" -- organiza- tions that bring together all stages of care from well-baby checkups in a pediatrician's office to transplant surgery.

Such systems, which have been forming in other markets, are positioned to negotiate deals with HMOs and other managed-care insurers to provide a full range of care. And patients can be moved throughout the system to the most cost-effective level of care.

They also stand to save money by combining operations, especially in capital-intensive areas such as data processing. In Maryland, nearly three-quarters of all hospitals have merged or joined in alliances that do group purchasing and contracting, but Helix is the largest fully-merged system.

Accelerate consolidation

"We've been talking for years theoretically about the market consolidating or dividing up into a small number of integrated systems," said Sister Helen Amos, RSM, chief executive officer of Mercy Medical Center, an independent hospital in downtown Baltimore. "The minimum that this would cause to happen is that everybody will say, 'Uh oh, is this it?' "

A Hopkins-Helix union would "accelerate the consolidation of the hospital industry in Maryland," said Nelson Sabatini, vice president for integrated delivery systems operations of University of Maryland Medical System. University, too, is looking to build a system, although perhaps through working agreements short of acquisition or merger.

Amos said hospitals such as hers "don't want to be standing when the music stops and all the chairs are taken."

Already, in recent weeks, Howard County General and Northwest Hospital Center have said they are looking for larger partners, and St. Joseph Hospital said it was discussing possible ties with Upper Chesapeake Health System, which operates the two hospitals in Harford County, Fallston General and Harford Memorial.

Marquee value

Helix would be interested in joining with Hopkins to gain further economies of scale, those in the industry say, and to get what Misek, the Prudential CEO, called "a brand name with real marquee value."

Helix brings experience in running a multihospital group and a network of doctors and hospitals that could help ensure a flow of patients to Hopkins for highly specialized care.

Helix also brings a track record of profitability, with a margin last year of 10.6 percent -- well above the state average of 6.2 percent. The Hopkins system had a margin of 4.3 percent.

Pub Date: 10/30/97

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