Baylor Scott & White, Memorial Hermann Health Mega Merger Called Off
Two major Texas hospital systems, Baylor Scott & White Health in Dallas and Memorial Hermann Health System in Houston, called off a mega merger deal Tuesday that would have created the largest hospital system in the state. No specific reason was given for the cancellation. “After months of thoughtful exploration, we have decided to discontinue talks of a merger between our two systems. Ultimately, we have concluded that as strong, successful organizations, we are capable of achieving our visions for the future without merging at this time,” a hospital spokesperson said in a joint statement. “We have a tremendous amount of respect for each other and remain committed to strengthening our communities, advancing the health of Texans and transforming the delivery of care. We will continue to seek opportunities for collaboration as two forward-thinking, mission-driven organizations.” If the merger had passed, the system would have managed 68 hospitals and more than 73,000 employees. It also would have created one of the largest not-for-profit systems by revenue, according to Modern Healthcare. Baylor Scott & White Health and Memorial Hermann Health signed a letter of intent in October to merge “to further strengthen communities, advance the health of Texans and transform the delivery of healthcare.” Another huge year for hospital, healthcare mergers While this mega merger deal fell through, several other major joint ventures made headlines in 2018, capping off another year of increased mergers and acquisitions activity in the healthcare industry. The total volume of deals increased by 14.4 percent from 2017 to 2018, according to an analysis by PricewaterhouseCoopers, although the value of those deals declined more than 30 percent, and slowed some in Q4. Of all the healthcare deals in 2018, the largest and most notable was CVS Health’s acquisition of Aetna for $69 billion, which was finalized in November. “Today marks the start of a new day in healthcare and a transformative moment for our company and our industry,” CVS Health President and Chief Executive Officer Larry J. Merlo said in a press release. “By delivering the combined capabilities of our two leading organizations, we will transform the consumer health experience and build healthier communities through a new innovative health care model that is local, easier to use, less expensive and puts consumers at the center of their care.” Healthcare leaders are still waiting to see how this landmark deal will impact the industry and marketplace, and providers are wary that the merger could create a landscape that incentivizes use of urgent care centers and retail clinics over traditional healthcare facilities, according to a report from Revcycle Intelligence. Merger and acquisition activity in 2019 is expected to remain strong, although healthcare executives expect the actual volume of activity will level out, according to a recent survey by Capital One.
After Bitter Closure, Rural Texas Hospital Defies The Norm And Reopens (KHN)
By Charlotte Huff, Kaiser Health News Five months ago, the 6,500 residents of Crockett, Texas, witnessed a bit of a resurrection — at least in rural hospital terms. A little more than a year after the local hospital shut its doors, the 25-bed facility reopened its emergency department, inpatient beds and some related services, albeit on a smaller scale. Without a hospital, residents of Crockett, located 120 miles north of Houston, were 35 miles away along rural roads from the next closest hospital when a medical crisis struck, said Dr. Bob Grier, board president of the Houston County Hospital District, which is the county’s governmental authority that oversees Crockett, a public hospital. “Someone falls off the roof. A heart attack. A stroke. A diabetic coma. Start naming these rather serious things and health care is known for its golden hour,” he said. The late-July reopening of the newly named Crockett Medical Center makes it a bit of a unicorn in a state that has led nationally in rural hospital closures. Since January 2010, 17 of the 94 shuttered hospitals have been in Texas, including two that closed in December, according to data from the University of North Carolina’s Cecil G. Sheps Center for Health Services Research. But Crockett’s story also reflects some of the challenges faced by rural hospitals everywhere. Board members frequently have limited background in health care management and yet are responsible for making financial decisions. Add to that mix a Lone Star State resistance to raising local property taxes. An effort to increase the county’s 15 cents per $100 property valuation for the hospital district has been defeated twice since the hospital closed. And a small rural hospital like Crockett’s has “no leverage” when negotiating reimbursement rates with insurers, Grier repeatedly points out. The tough reality is that too many rural hospitals in Texas and elsewhere, when negotiating with insurers and other financial players, “are almost always negotiating from weakness and sometimes from literally leaning out over the edge of the [survival] cliff,” agreed Dr. Nancy Dickey, executive director of the A&M Rural and Community Health Institute at Texas A&M Health Science Center. Rural communities must think more creatively about how to meet at least some of their health needs without a traditional hospital, whether it’s forming partnerships with nearby towns or expanding telemedicine, Dickey said. “There is little doubt in my mind that many of these communities are going to see their hospitals close,” she said, “and are not going to be able to make an economic case to reopen them.” The A&M institute, which in December published a report looking at these challenges for three Texas communities, recently landed a $4 million, five-year federal grant to help rural hospitals nationwide keep their doors open or find other ways to maintain local health care. Demographics And Decisions The financial headwinds have been particularly fierce in Texas, one of 14 states that has not expanded Medicaid eligibility after the passage of the Affordable Care Act. “That makes a huge difference,” said John Henderson, chief executive officer of the Texas Organization of Rural & Community Hospitals, known in Texas rural circles as TORCH. “But that doesn’t change the reality that we aren’t going to do it.” Leading up to the state’s biennial legislative session, which begins in January, rural leaders are making the case that state legislators need to take steps to bolster the state’s 161 rural hospitals, starting with rectifying underpayments for Medicaid patients. As the state’s program has transitioned to managed care, over time reimbursements have shrunk to the point that rural hospitals are losing as much as $60 million annually, according to TORCH officials, who cite state data. They also support a congressional bill, HR 5678, that would make it easier for rural hospitals to close their inpatient beds but retain some services, such as an emergency room and primary care clinic. Under current federal regulations, facilities that make such a move are no longer considered a hospital and can’t be reimbursed by Medicare and Medicaid at hospital rates, which are often higher than payments to clinics or individual doctors. Those lower rates make it harder for stripped-down facilities to keep up their operations, said Don McBeath, TORCH’s director of government relations. Crockett’s hospital, then called Timberlands Healthcare, abruptly shut down in summer 2017 after just a few weeks’ notice from its management company, Texas-based Little River Healthcare. Little River, which was also the subject of an analysis by Modern Healthcare that showed several of its hospitals engaged in unusually high laboratory billing for out-of-state patients, has since filed for bankruptcy. Two other rural hospitals affiliated with Little River closed their doors in December As it struggled to stay open, Crockett’s hospital had been treating a population that was increasingly poor and aging, according to Texas A&M’s report. The researchers describe in the report — Crockett is “community 1” among three communities featured — that the hospital was overstaffed with more than 200 employees given its daily average census of three hospitalized patients. Also, they wrote, board members should have more closely questioned the management company. The board said they were given data at each meeting, “but that data did not suggest the imminent demise of the hospital,” the report’s authors wrote. Fighting The Closure Tide Leaders in Crockett tried to capture the interest of other hospital systems to reopen and manage the facility, without success, Grier said. Along with staffers losing their jobs, the community knew it would be more difficult to persuade people to relocate or retire to the area without a hospital nearby, he said. Every weekday at noon for weeks on end, a small group of two to 20 people gathered beneath the hospital’s front portico to pray for some avenue to reopen, Grier said. Then, as the odds looked increasingly long, they got a call out of the blue from two Austin-based doctors. “I feel God was involved,” Grier said. “They have told us that they were looking for some