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Hospitals Continue to Merge

Published Friday Nov 8, 2024

Author Scott Merrill

Dartmouth Hospital is at the heart of Dartmouth Health’s extensive network. (Courtesy of Dartmouth Hospital)


Rising costs and increased competition have led to a wave of hospital mergers over the past decade. Now, only five of NH’s hospitals remain unaffiliated with larger healthcare organizations. While some smaller hospitals have merged with Dartmouth Health—the largest health care system in the state—others have merged with nearby NH hospitals or looked south to Massachusetts.

And the merger and affiliation trend continues to play out in the Granite State as Catholic Medical Center is seeking a merger with the country’s largest for-profit health care system—HCA Healthcare, while Valley Regional Hospital in Claremont became the newest member of Dartmouth Health in late July.

“If you watch the national news, every day there’s another merger or hospital closing,” says Darin Roark, president of Wentworth-Douglass Hospital in Dover, citing workforce shortages in nursing support personnel, and the demand for acute patient care as reasons. Wentworth-Douglass has been owned by Mass General Brigham since 2017. “A hospital is a giant machine that takes a lot of professionals to bring care.”

Roark says while Wentworth-Douglass had a smooth transition with Mass General Brigham, mergers can present challenges in terms of integrating cultures. “You can see that with Catholic Medical Center, which is a religious hospital merging with a private organization,” he says. “And there is always going to be a fear of change, of being part of a bigger system.”

In 1994, Catholic Medical Center (CMC) and Elliott Hospital, both in Manchester, affiliated to form a new entity called Optima Health. That partnership collapsed in 2000 due to the hospitals’ “divergent cultures, public reaction to the consolidation plan, and the transaction’s alteration of the hospitals’ charitable missions,” according to a 2023 Harvard Law School report on NH’s charitable trusts. According to a 2001 article by the Healthcare Financial Management Association, Optima failed to fully consider religious differences between the two hospitals and the consolidation was found to have changed the charitable missions of the two tax-exempt hospitals in violation of federal laws. 

CMC is now trying a merger once again. The hospital signed a Letter of Intent last fall to merge with for-profit HCA Healthcare, in partnership with the Diocese of Manchester. CMC was originally founded by religious orders with strong ties to the Catholic Church. CMC President and CEO Alex Walker says any merger with HCA, which runs three secular NH hospitals, would “embrace our Catholic mission” and that CMC will continue to operate under the same ethical principles it does today. 

In July CMC reached an agreement to merge with HCA pending a regulatory review process with the NH Attorney General’s Office that is underway.

Catholic Medical Center in Manchester is attempting a merger with HCA Healthcare. (Courtesy of Catholic Medical Center)


“This agreement is the result of months of due diligence, thoughtful negotiations between our organizations and discussion with the local community about how we can best serve them,” says Walker. “HCA is committed to healthcare excellence, community service, and investing in our people and facilities. With three hospitals and four decades of providing healthcare services to the state, we are confident HCA will continue CMC’s mission of offering health, healing, and hope to the Manchester community for decades to come.”

In a statement, CMC says during the transition it will maintain its “commitment to delivering excellent patient care as it has for the past 50 years” and will continue normal operations throughout the regulatory process.

Financial Pressure on Hospitals Leading to Mergers
The financial pressures faced by hospitals were laid bare during the COVID-19 pandemic, which only increased those pressures, driving smaller, especially rural hospitals to consolidate, according to the Harvard Law School report. From 1998 to 2021, the number of hospitals nationwide dropped from 8,000 to 6,000 due to consolidations and the percentage of hospitals that are part of a larger system increased from 53% in 2005 to 66% in 2017.

“Running a standalone community hospital is one of most difficult jobs in America and the challenges are only going to grow for smaller hospitals,” says NH Hospital Association President
Steve Ahnen.

About half of NH hospitals are classified as Medicare Critical Access Hospitals (CAHs), which means that they have no more than 25 inpatient beds and are more than 35 miles away from the nearest hospital or CAH. Out of the 13 critical access hospitals in NH, five remain independent (Cottage Hospital in Woodsville, Huggins Hospital in Wolfeboro, Littleton Regional Hospital in Littleton, Monadnock Community Hospital in Peterborough, and Speare Memorial Hospital in Plymouth.)Huggins and Monadnock were part of the GraniteOne Health system with CMC but the three hospitals voted to dissolve the affiliation in late 2022.

Ahnen says mergers allow hospitals to be more efficient and better meet community needs. “Putting the pandemic aside, over the last decade, as hospitals have strived to care for patients needing complex care, they’ve needed to make sure they had the necessary resources to care for patients,” he says. This, he adds, involved providing specialists like cardiologists or orthopedic surgeons. “Having those pieces all within a larger system allows you to create a more coordinated care structure.”

While mergers can help hospitals improve efficiency and broaden access to care, concerns about potential cost increases and reduced patient choice were raised. Last year, Frisbie Memorial Hospital in Rochester moved its labor and delivery services to Portsmouth Regional Hospital,  becoming the 11th hospital in the state to stop offering birthing services since 2000. Frisbie was acquired in 2020 by HCA, which owns more than 180 hospitals in the U.S. and United Kingdom, including Parkland Medical Center in Derry and Portsmouth Regional Hospital.

Systemic Problems
Ahnen says workforce shortages and increased demand for behavioral health services were two of the biggest challenges highlighted by the pandemic, forcing hospitals to look even closer at their models of care. “Hospitals need to invest in facilities, technologies, and people,” he says. “The adage is that 50% of a hospital’s budget is made up of people, including docs and staff. Given the workforce challenges brought out by the pandemic those costs have been exacerbated.”

Roark says niche positions like prosthetists/orthotists, radiographers and surgical technologists demand higher salaries and these increases, combined with inflation and the need for infrastructure improvements “drive health care costs through the roof.”

Also, in recent years, healthcare has shifted from a volume model to one based on value and outcomes. “It’s about building networks today,” Ahnen says, explaining the pandemic demonstrated the importance of the need for healthcare systems and standardized clinical protocols. “When one piece is stressed, this ripples across the entire system.”

Maintaining and managing medical records is a huge cost, Ahnen says. “This can cost millions to tens-of-millions annually depending on the size of the hospital and with the advent of AI, investments must be made,” he says, adding that “Hospitals need systems to provide privacy and security.”

Roark says the Wentworth-Douglass merger with Mass General Brigham has allowed the hospital to pool its records and billing resources. “That’s a benefit that has helped reduce overhead costs,” he says, explaining that departments like information control and billing are now combined. Another benefit has been an increase in access to care for patients on the Seacoast. “In the past we’d transfer patients to hospitals in Massachusetts, but our relationship today allows us to keep patients at home. They come to us to get care and that’s a beautiful thing.”

Challenges Facing Mergers
Before a deal is finalized between CMC and HCA, the NH Attorney General’s office will examine the deal closely, especially considering HCA’s announcement last year that it would shutter the labor and delivery unit at Frisbie Memorial Hospital. A spokesperson for the AG’s office pointed to a statement made to NH Public Radio by NH Attorney General John Formella, where he said: “Any proposed merger will merit a lot of close scrutiny including how it might impact costs and access to care for patients. There’s no question that prior experiences with an organization will inform a review of a future transaction, and trust is really important. So, I think it is safe to say that HCA has some work to do to continue to rebuild trust with the state.”

By law, NH hospitals are classified as Healthcare Charitable Trusts established to hold and manage funds for charitable purposes related to healthcare. The trust collects donations, grants, and other funds from individuals, corporations, and foundations. Funds are invested to generate income, which is then used to support the trust’s mission.

Of NH’s 26 hospitals, 23 are considered charitable trusts regulated by the state. “When an entity merges or enters into an agreement with another organization we follow the statute, asking: Will it benefit the community? Is it in the best interests of both the hospital, the healthcare charitable trust and the community that it serves? Have they negotiated the terms of the transaction reasonably,” says Mary Ann Dempsey, director of the Charitable Trusts Unit of The Attorney General’s office.

New Hampshire law requires that all change of control transactions satisfy specific factors, including that the “acquiree exercise due diligence in selecting the acquirer, negotiating the terms and conditions of the proposed transactions, and in determining that the transaction is in the best interest of the healthcare charitable trust and the community or communities which it serves.”

“One of the things we’re always thinking about is the impact of these transactions and we take these reviews very seriously,” says Assistant Attorney General Alexandra Sosnowski, who handles consumer protection and antitrust cases with hospital mergers. “We scrutinize these transactions as much as possible under the antitrust laws that we have in our toolbox and are seeking to keep these access points for consumers and competition for as long as possible. That is very important to us.”

Mergers Moving Forward
High vacancy rates for nurses and doctors exist at many NH hospitals and this affects patients’ access to care, Ahnen says.

The American Hospital Association (AHA) supports hospital mergers, arguing they can lead to significant benefits for patients and the healthcare system. Ahnen says mergers, which will continue, allow hospitals to maintain competitive salaries and create competition that is healthy for communities. He adds that hospital mergers can offset workforce challenges. “Ninety one percent of physicians in medical school today want to be employed by a hospital as opposed to hanging their own shingle,” he says. “Often we hear stories about the negative impacts of mergers. My view is that this is incomplete.” 

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