December 8, 2012

Mercy plans to merge with Eastern Maine Health System

The Portland hospital walks away from a deal that would have made it the first for-profit hospital in the state.

By Edward D. Murphy emurphy@pressherald.com
Staff Writer

The nonprofit health care organization that includes Mercy Hospital abruptly dropped its plan to be acquired by a for-profit Massachusetts company Friday and signed a letter of intent to merge with the nonprofit Eastern Maine Healthcare Systems.

click image to enlarge

After a deal to be purchased by a chain failed, Mercy Hospital, including its Fore River Parkway campus, plans to merge with Eastern Maine Healthcare Systems.

Carl D. Walsh / Staff Photographer

Mercy Health System of Maine did not say what went wrong in its negotiations with the Boston-based Steward Health Care System, issuing only a terse statement saying that the two sides had engaged in exclusive negotiations since August "but were unable to come to a definitive agreement. As a result the Letter of Intent is terminated."

Steward Health Care System was negotiating to buy the two Mercy Hospital campuses in Portland and nine primary care facilities in Greater Portland.

Steward is a for-profit chain of 10 hospitals that is, in turn, owned by Cerebus Capital Management, a private equity firm.

A Mercy spokesman said the Catholic organization felt a strong sense of kinship with Eastern Maine Healthcare Systems, which operates seven hospitals including Eastern Maine Medical Center in Bangor and nine nursing homes and retirement communities in northern and eastern Maine.

"For patients, it will bring valuable new linkages with top hospitals, doctors and best practices and, best of all, it's here in Maine," said Susan Rouillard, Mercy's chief development and communications officer. "It should be perceived as good news for everybody in Maine."

Experts said that Steward's purchase of Mercy -- part of a nationwide trend of hospitals joining larger chains -- could have brought newer technology and more services to patients, while the emphasis on profit caused others to urge caution.

Steward hasn't operated long enough to generate scorecards on its quality of care, but other chain-owned hospitals have shown mixed results, with lower-than-average scores on patients' experience but better scores on their processes, experts said.

Rouillard said Eastern Maine Healthcare Systems "has a terrific record for patient care" and has taken on a lead role in some areas, such as establishing an accountable-care organization, a key feature of the federal health care reform law that seeks to provide better care while controlling costs.

Rouillard said the merger would create a large joint presence in the state -- Eastern Maine has about 8,000 employees, Mercy has about 1,700 and both have multiple locations -- while maintaining each organization's focus on community service.

"Their community benefit piece is highly mission-driven and their mission and values are similar to ours," she said. "Culturally, there's very good synergy there."

She noted that the Eastern Maine system's nursing and retirement homes will mesh well with Mercy's hospice and visiting nurse operations.

Rouillard said she's not sure how long it might take for the organizations to conclude negotiations and get necessary permits to merge, but it would likely be similar to the estimate of six months for Steward's acquisition of Mercy.

Rouillard would not comment on the negotiations with Steward, nor would Chris Murphy, spokesman for the Massachusetts company.

For Steward, it was another failed attempt to expand beyond Massachusetts.

The deadline on the company's offer to buy Jackson Health System in Miami passed last year without action by the Florida system. And in October, Steward dropped its effort to buy the bankrupt Landmark Medical Center in Woonsocket, R.I.

In that case, health care groups in Rhode Island and the special master running the hospital weren't able to meet some conditions of the sale.

Staff Writer Edward D. Murphy can be contacted at 791-6465 or at:

emurphy@pressherald.com

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