North Arundel, UMMS merge for convenience

State system gains suburban base while offering specialists

Health care

June 27, 2000|By M. William Salganik | M. William Salganik,SUN STAFF

The University of Maryland Medical System and North Arundel Health System formally signed a merger agreement yesterday, allowing the university system to reach more suburban patients and giving North Arundel a boost in developing cancer and obstetrical programs.

The deal creates a medical system with $900 million in annual revenue, 1,900 licensed beds and more than 9,000 employees.

North Arundel will officially become part of the University of Maryland Medical System (UMMS) July 1. It will retain substantial autonomy, keeping its name, management, staff and board.

"We are a good community hospital," said James R. Walker, president and chief executive office of North Arundel. "Merging will make us an even better community hospital."

UMMS includes the 724-bed University of Maryland Medical Center downtown (University Hospital, the Shock Trauma Center and the Greenebaum Cancer Center), a 300-bed community hospital, Maryland General, and two rehabilitation facilities, Kernan Hospital and Deaton Specialty Hospital and Home. For the fiscal year ending this week, it expects $750 million in revenue and an operating surplus of $7 million.

The North Arundel Health System is based at 35-year-old, 329-bed North Arundel Hospital in Glen Burnie. It also includes the 102-bed Mount Washington Pediatric Hospital. It projects $131 million in revenue and $4 million in surplus for the fiscal year about to end.

"The combination of North Arundel and UMMS made enormous market sense," said Dr. Morton I. Rapoport, UMMS' president and chief executive officer.

North Arundel's merger into the UMMS system comes at a time when hospitals find their merger fever cooling, having combined at a furious pace just a few years ago under pressure from managed care.

"What was driving it was the fear of being locked out by the insurers if you weren't part of a network," said Thomas R. Mullen, president and CEO of Mercy Medical Center, a hospital that considered merger but now intends to remain independent.

Mullen noted that health management organizations did not generally sign exclusive contracts with large hospital systems, so some hospitals decided they could prosper independently.

But while some other mergers have foundered, this one is "a long-term plus," said Bruce Gordon, senior vice president of Moody's Investors Service, who issued a report on UMMS in March.

Academic medical centers, such as UMMS, seek to affiliate with community hospitals such as North Arundel to expand their patient base and get more referrals for sophisticated, specialized services, said John McDaniel, CEO of MedStar Health, a six-hospital group now in the process of adding Georgetown University Medical Center to its system.

At the same time, McDaniel said, "Solo, freestanding community hospitals are lacking the bench strength and depth in clinical services."

Walker said North Arundel hoped to add UMMS cancer services over the next 12 to 18 months to expand its current offerings into "a comprehensive cancer program."

Next, he said, North Arundel hopes to add obstetric services over the next two to three years. Obstetrics are seen by hospitals as important in developing a loyal patient base.

Under current law, North Arundel cannot offer obstetrics without approval of state health planners, and would be likely to face opposition from competing hospitals.

Even without new programs, affiliation with a prestigious academic medical center - Moody's Gordon called it "putting the UMMS sticker on North Arundel" - can help bring patients to a community hospital.

Rapoport said Maryland General had seen about a 20 percent increase in admissions since joining UMMS, in part from the closing of other hospitals but in part from its UMMS connection.

Walker said North Arundel would develop with money promised by UMMS as part of the agreement. He said the amount of money was "a very confidential item."

UMMS and North Arundel have been talking since October, and announced a "letter of intent" to merge in January. Since then, the two sides have continued to work out details of the deal.

Lysbeth Courtney, chair of North Arundel's board, said it had reviewed "several" proposals from potential partners, but chose UMMS because of the potential for "program development" and "respect for the culture" of the community hospital. The building of a new hospital for Anne Arundel Medical Center, the other hospital in Anne Arundel County, had "nothing to do with" the decision, she said.

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