2 Shore hospitals, UM discuss merger

Maryland would invest in smaller system

October 07, 2005|By MEREDITH COHN | MEREDITH COHN,SUN REPORTER

Shore Health System, a set of community hospitals on the Eastern Shore, is in talks to merge with the University of Maryland Medical System in an effort to boost business and services, officials for both groups said yesterday.

The two systems have signed a letter of intent, and a deal could come as soon as this winter, although there is not a time limit to send it to their respective boards for approval.

There would not be a cash payment, but Maryland would make an unspecified amount of investment in staff and hospital infrastructure on the Shore, said John W. Ashworth III, the Maryland system's senior vice president of network development and associate dean of Maryland's School of Medicine.

The Shore system has two hospitals, in Cambridge and Easton, with 1,700 employees, 203 hospital beds and $172 million in revenues.

"The Shore is starting to grow very rapidly, primarily driven by retirements," said Joseph P. Ross, president and chief executive of Shore Health. "These folks come and have health care needs, so demand for service is growing."

Maryland, a private, not-for-profit teaching organization, is one of the largest medical systems in the state, with six Baltimore-area hospitals, 11,000 employees, 1,600 beds and $1.5 billion in revenues.

"We have a vision of being the health care provider of choice for the citizens of predominantly five counties in the mid-Shore area," Ashworth said.

"What we bring is scale, financial resources and access to a health care provider pipeline. What Shore brings is a clear understanding of the needs of the Eastern Shore and the hospital assets that have been serving citizens of the Shore."

The two systems need to work out financial and legal details, Ashworth said. The merger and any growth in services would have to be approved by state regulators. No job cuts are expected.

In addition to access to more physicians, Ross said, the Shore hospitals will get new specialty programs, enhancement of existing programs and access to capital for hospital facility upgrades. With increased size, the community hospital system may also get some more influence in shaping public health care policy, he said.

The two systems have worked together on various programs, including one that brought critically ill patients from the Shore to Baltimore for specialized services. Maryland physicians have also provided staffing for Shore Health's emergency departments.

Ashworth and Ross said community meetings will be planned to gain public input on needs and to reassure citizens that both Shore hospitals will remain open and services will remain intact.

"Things have been the way they are for a very long time, and change is difficult," Ashworth said. "What we have to do is really communicate our vision well so everyone is aligned behind the vision."

Hospital mergers were popular during the 1990s because of cost pressures from managed care organizations. But they have slowed in recent years, "in part because most of the mergers and acquisitions that were going to take place did," said Bruce Gordon, senior vice president of Moody's Investors Service, the bond-rating service that has studied the Maryland System.

He said he couldn't say how this merger would work out with so few details known.

"In our experience, most mergers stumble in the first couple of years before they right themselves," Gordon said. "Based on a majority of merger and acquisition activity in the last five years or so, most have taken time to gel. That doesn't mean they won't gel. Some have worked out well."

meredith.cohn@baltsun.com

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