North Arundel and Mercy to join forces Hospitals will keep their names, share corporate board

Details coming in March

Both institutions have dealt well with shift to managed care


January 21, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Mercy Medical Center and North Arundel Health System announced yesterday they have agreed to join forces in a merger expected to be completed by July.

The two hospitals plan to create a new parent corporation, with equal board representation from Mercy and North Arundel. Both hospitals will keep their names, their chief executives, their current services and their characters.

"We want the institution that's been known as Mercy for 125 years to remain strong," said Sister Helen Amos, RSM, Mercy's president and chief executive. "The Catholic identity of Mercy can be preserved within a larger system."

That system will be "a not-for-profit, nonsectarian health system that seeks to grow through affiliations with other hospitals and other providers," said James L. Walker, president and CEO of North Arundel.

Details of the merger -- including the name and leadership structure -- will be worked out by the end of March.

The partnership brings together two institutions which in some ways seem an odd couple: a long-established, Roman Catholic hospital in downtown Baltimore and a post-World War II community facility in Glen Burnie.

But the two share a track record of being among the nimblest over the past few years in coping with the tidal wave of change brought by the rapid growth of HMOs and other managed-care insurers.

Mercy has built strong, high-profile programs in such areas as women's health, cancer care and occupational medicine, and used its downtown Baltimore location as an asset in marketing itself. Over the past few years, Mercy managed to gain patients at a time when managed-care pressure was moving more care out of hospitals.

North Arundel has been a leader among community hospitals in adapting to managed care, with a subsidiary called New American Health that does contracting and functions as an HMO for the state Medicaid program. Its strongest programs -- including orthopedics, cardiology and emergency medicine -- complement Mercy's.

With more patients being treated in nonhospital settings, both have moved outside their campuses to contract with primary-care doctors, to provide home health services, and to offer nursing home and rehabilitation facilities.

Within the past year, Mercy acquired Stella Maris, a long-term-care and hospice facility, while North Arundel picked up Mount Washington Pediatric Hospital, which focuses on outpatient treatment and rehabilitation. Both Mercy and North Arundel are developing assisted living and other housing-for-the-elderly projects.

Walker said North Arundel's strategy has been based on an assumption that the area would see "three, four, perhaps five major health systems evolve."

Calvin M. Pierson, president of the Maryland Hospital Association, said it is not clear whether the Mercy-North Arundel partnership is the first sign of a new wave of hospital mergers creating a few large systems.

About three-quarters of Maryland's 50 hospitals are in some kind of affiliation, Pierson said, "but the preponderance are still in two-hospital systems. The jury is still out on whether they will come together to form larger systems."

But Nelson Sabatini, a vice president of the University of Maryland Medical System who works on building its network, said recent talks between the Johns Hopkins and Helix hospital systems had made many hospitals realize that "the time is now approaching rapidly to start moving toward consolidation."

Similarly, Michael R. Merson, president and CEO of the five-hospital Helix Health System, said the Mercy-North Arundel deal "signals the continued consolidation and development of health care delivery systems, which has been commonplace in other parts of the country."

Hospitals are merging into systems to give them market power in negotiating managed-care contracts. Adding physicians, nursing homes and the like allows them to offer a full package of services to HMOs, and to manage care and costs.

In some markets, such as New York, Catholic hospitals have tended to merge into Catholic systems. But in others, Catholic hospitals have merged with non-sectarian ones -- in some cases, even joining for-profit chains.

In Maryland in the past few years, Catholic and non-Catholic hospitals joined in Baltimore (Liberty Medical Center merging into the Bon Secours hospital system), and Cumberland (Sacred Heart and Cumberland Memorial Hospital merged into Western Maryland Health System). Currently, St. Joseph Medical Center in Towson is in "partnership" talks with Upper Chesapeake Health System, which runs two nonsectarian hospitals in Harford County.

Amos said the merger had been approved in concept by Archbishop William Keeler and by the Sister of Mercy order, and that both would be involved in approving the final details.

Pub Date: 1/21/98

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