Northeast Ohio Hospital Consolidation Continues

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First, the Cleveland Clinic announced that it will take full ownership of Akron General Health System in Summit County.

Then, less than two hours later on Friday, Northeast Ohio's other big health system University Hospitals said it will buy Samaritan Regional Health System in Ashland County. And Monday morning, University Hospitals announced another deal: It will take over full ownership of St. John Medical Center in Westlake.

The recent blitz of hospital mergers are part of a broader national trend. Last year, there were 95 deals announced in the U.S. up from 66 in 2010, according to one health care consulting firm.

The reasons are all the same: lower reimbursement from Medicare and Medicaid has meant less money paid to hospitals for patient care. In addition, fewer patients are staying in the hospitals, as more care is given on an outpatient basis.

And, for small and medium sized hospitals, the high technology infrastructure costs are often crushing.

Akron General's CEO Dr. Thomas Stover, says the investment that was needed to upgrade electronic medical records system was one reason to sale. 

"Couldn't afford it, couldn't afford it," Stover said. "I mean as successful and as big as we were, almost $700 million, we couldn't afford it."

Hospitals find themselves needing to upgrade technology to keep up with payment reform demands form both private insurance companies as well as Medicare and Medicaid. In addition, smaller hospital systems cannot negotiate as well as larger ones with health insurers for payments or supply companies for bulk purchases. Akron, for example, affiliated with the Clinic last year and reports that it saved an estimate $1.3 million because it joined a group purchasing organization with the Clinic.

The Clinic will also purchase new medical equipment that will link Akron's patients to electronic medical records and develop a new emergency department at Akron General, slated to open in 2017. Clinic CEO Dr. Toby Cosgrove said in a press statement that Akron is "the right cultural fit between our organizations."

The Clinic is the largest health system in the region, with 6.7 billion in operating revenue and 45.5 percent of Cuyahoga County's market share, according to its annual State of the Clinic report. UH is second largest regional health system with nearly $3 billion in operating revenue, according to its annual report. 

UH's deal to buy Samaritan Regional Health System in Ashland County extends the health system's reach south of Cleveland.

And the deal announced Monday with St. John gives UH a strong presence on Cleveland's growing west side.

"The environment on the west side has changed so substantially," said Terrence Kessler, president and chief executive of Sisters of Charity Health System, which owns St. John. Kessler called the hospital a "cornerstone" in the UH's strategy for the west side.

Over the past five years, UH had operated St. John in a joint agreement with the Sisters of Charity. The larger system has agreed to keep the hospital Catholic, maintaining accountability to the Bishop of the Diocese of Cleveland.

Sisters of Charity owns four other Catholic hospitals, including St. Vincent Charity Medical Center in Cleveland and Mercy Medical Center in Canton. Kessler said the deal will allow his system to focus on the future strategy of his other hospitals.

"We need to work with each of the individual hospitals in their individual markets to get them to  the right place where they are sustainable in a growing way," Kessler said. 

Along with lower reimbursements and the demands for new technology, hospitals also are trying to figure out how they will get paid in a world where insurers and the federal government want them to keep patients healthy, he said.

(Story by Sarah Jane Tribble).



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