Anatomy of a Merger What’s Next for Cooley Dickinson as It Affiliates with Mass General?

Dr. Margaret Russo has heard the concerns.

Specifically, she’s heard complaints that Cooley Dickinson’s pending merger with Massachusetts General Hospital will mean more aggravation for patients and less autonomy for the hospital itself.

“Patients won’t have to make the trip to Boston any more frequently than they already are,” said Russo, president of CDH’s medical staff. “If Northampton continues to be the appropriate place to get care, that will continue. And Mass General has a telemedicine program they intend to expand here in Northampton, allowing our patients to have access to expert care in Boston, remote access, without ever having to leave the Valley. Our physicians will have greater access to physicians at Mass General as we improve on these relationships.”

In some ways, Cooley Dickinson’s merger may not be as dramatic as it seems, as the Northampton hospital was affiliated with the New Hampshire-based Dartmouth-Hitchcock health system from 1992 to 2008. But in other ways, the new affiliation reflects the emergence of some broader economic trends in health care that promise to dominate the industry for years to come.

The other news from the merger announcement, of course, was the rejection of the other finalist for affiliation, Baystate Health, which already operates three hospitals across the Pioneer Valley.

“There were two really good alternatives” for an affiliation, Melin added, “and when we were done, we were going to be working with both. I expect we’ll be building relationships … with Baystate even as we adopt our Boston partner.”

Indeed, not only has Cooley Dickinson been working closely with both Mass General and Baystate throughout the past year of partnership talks, but it has ties to both. Baystate provides specialty and subspecialty services to physicians and patients of CDH, including transfer relationships for cardiac surgery, neonatal intensive care, trauma, and other specialized services. A number of Baystate physicians serve in consulting capacities at CDH. Meanwhile, Cooley Dickinson has forged a strong relationship with Mass General through its oncology program, where many Western Mass. cancer patients undergo treatment.

Matthew Pitoniak, chairman of Cooley Dickinson’s board of trustees, which made the final decision on the merger, said both Mass General and Baystate offered CDH the ability to achieve certain stated goals: to develop and expand care programs, increase revenue, reduce overhead costs, and help Cooley Dickinson thrive in the new era of ’population-based’ care delivery and payment (more on that later).

However, he said, Mass General offered the better combination of “financial resources and intellectual knowhow” to help CDH thrive as it navigates the restructuring of health care delivery and economics that will dominate the coming decade in the industry. After months of meetings with leaders from both systems, a majority of the board voted on Feb. 27 to enter into exclusive negotiations with Mass General, and the board then voted unanimously to support that decision.

“We are truly humbled that the leadership of Cooley Dickinson Hospital has placed its trust in Mass General to help preserve and enhance the outstanding care that patients and families in Western Mass. have counted on for so long,” said Dr. Peter Slavin, president of MGH, in a statement. “We look forward to working with the Cooley Dickinson board, management, physicians, and staff on the next phase of this process.”

Melin said the deal with Mass General will grow programs and patient volume by bringing additional specialists to Northampton, and will also help Cooley Dickinson reduce overhead costs by providing access to low-interest bond refinancing, lower malpractice-insurance costs, and group-purchasing rates for big-ticket items, such as information-technology systems.

Whether those assertions quiet the public’s concerns remains to be seen. But in a new era for health care, Cooley Dickinson Hospital has certainly made a strong statement — one bound to resonate through the Valley for some time.

New Paradigm

Earlier this year, Melin told BusinessWest that Cooley Dickinson doesn’t have to merge with a partner right now, but the economic trends in health care are making such an arrangement more desirable, and CDH wants to stay ahead of the curve.

The Great Recession, he noted, has contributed to an ongoing contraction in jobs and, thus, a shrinking tax base, which impacts health care revenue sources like Medicare and Medicaid. At the same time, the recession’s impact on pocketbooks has lowered demand for many elective procedures that bring income into hospitals.

Amid this environment, the health care industry is beginning to see a shift away from a ’pay-for-performance’ model, where providers are paid for each treatment or procedure, and toward a population-based model, in which several providers (sometimes referred to as an accountable-care organization, or ACO) share one payment for all of a patient’s care over a certain period. The model is focused on efficiency, but demands quality of care as well — or no one gets paid.

All of this will mean growing operational stress for hospitals and physicians, Melin said. Organizations that thrive in this system will provide clinical and economic integration among hospitals and physicians for delivery of care. And without a partner, CDH’s trustees worried, the hospital could wind up in a weakened position in the future, forcing it to close programs and reduce access to health care for area residents.

Given these new realities, Melin said, a merger just made too much sense. “Health care, in most everyone’s opinion, costs too much. We’re going to need to reduce those costs.”

So Cooley Dickinson, which was independent for all but the 16 years it was under the Dartmouth-Hitchcock umbrella, began a search for a new partner in 2010.

It initially reached out to several potential partners before narrowing their discussions to Mass General, Baystate, and Vanguard Health Systems early in the process.

Vanguard, the only for-profit system among the group, was the first of the three finalists to be eliminated from consideration. It offered the possibility of a locally controlled foundation, with $2 million to $4 million available each year for preventive health efforts, but its lack of current clinical connections with CDH was a major factor in the decision not to continue talks.

Melin, Russo, and Pitoniak co-led the affiliation task force that conducted the search for a partner. The task force included 14 physicians, six trustees, and six administrators. Throughout the process, Russo said, trustees noted that the relationship forged between Cooley Dickinson and Mass General — specifically, co-managing care through CDH’s participation in Mass General’s Cancer Care program — was a solid sign that the institutions could work together similarly well in a broader partnership.

Dr. David Torchiana, chairman and CEO of the Massachusetts General Physicians Organization, agreed that the pending merger is good news for both institutions.

“Strengthening the relationship would enable caregivers at the two hospitals to communicate and collaborate more effectively, particularly around patients who may require highly specialized services,” Torchiana said in a statement. “As we all do our best to prepare for the uncertainties that lie ahead for health care, the systems of care we establish will be increasingly important.”

Baystate Disappointed

Baystate, Melin said, had proposed to include CDH in a regional care-delivery system that already includes Baystate Medical Center in Springfield, Baystate Mary Lane Hospital, in Ware, and Baystate Franklin Medical Center in Greenfield. But some CDH task force members and trustees were worried about reducing competition in the Pioneer Valley if Cooley Dickinson joined Baystate.

Leaders at Baystate, however, immediately expressed dismay with CDH’s decision.

“Our vision was for local governance and an integrated, regional system of care, and we are disappointed in Cooley Dickinson Hospital’s decision to join a Boston-based health care system, said Mark Tolosky, president and CEO of Baystate Health. “We feel this decision is not in the best interest of the residents of Western Mass.”

Richard Steele Jr., who chairs the Baystate Health board of trustees, also argued that Baystate would have been the best partner for CDH.

“It is of deep concern to us that local control of one of the region’s most important community assets may be transferred to a large Boston hospital corporation,” said Steele. “This is particularly troublesome at a time when so many businesses and jobs are leaving the area.”

Steele said he recognizes that health care reform and the current economic climate are driving a variety of partnerships across the state, but added that, of the health systems that CDH reached out to, only Baystate would have been a true community partner.

“We are proud to bring the best of both worlds to this community — a health system which is locally based, and which has achieved recognition across the nation for outstanding care and clinical quality,” added Tolosky. “We will continue to partner with others to improve the health care within the region.”

Russo stressed that Baystate will continue to play an integral role for many patients in need of specialized care. She also reinterated that the merger shouldn’t have a negative impact on employment in the organization. “I can’t see where either choice would have had a greater or lesser impact on jobs in Northampton. The idea … was to improve access and expand services to patients here in Northampton. Either way, that would require sustaining the jobs here, and perhaps even creating more.”

Pitoniak dismissed concerns about a loss of local control. He explained that Cooley Dickinson will maintain a local board of trustees, which will be tasked with credentialing physicians, as it does now, and monitoring the hospital’s compliance with the quality and financial performance metrics established by Mass General.

“With either option, the most important thing in the board’s mind was to keep this a community hospital for Hampshire County,” he told HCN. “That wouldn’t have changed under either scenario, and it won’t change under the scenario we have chosen. That’s the guiding principle.”

He pointed to Cooley Dickinson’s previous affiliation with Dartmouth-Hitchcock as evidence that a partnership doesn’t necessarily mean a loss of local autonomy.

“They owned the hospital for 16 years or so, and we hardly saw them,” Pitoniak noted. “The board still ran the hospital, and it was still independent. It’s the same model with Mass General. As with Dartmouth-Hitchcock, there will still be a board, which will still work with management and doctors on budgets, staffing, planning, and quality oversight. That’s what the board concentrates on. There really is no change.”

Melin went further, arguing that the local board will benefit from Mass General’s input. “They’ll gain insight from one of the world-class hospitals,” he told HCN. “The board will make the best local decisions they can with insight we wouldn’t have had otherwise.”

In short, Russo said, Mass General is a good fit for Cooley Dickinson because “its culture is a physician-led organization with a long history of physicians having a strong voice in how clinical decisions are made.”

Next Steps

The process of selecting a partner was thorough and included more medical-staff representation on the selection committee than is typical in these situations, Pitoniak said. In addition, the task force sought input through meetings with employees, physicians, volunteers, and community groups.

Now that the decision has been made, the actual merger will begin, Melin said, with a “due-diligence process” where the two organizations will study each other closely. Over the next few months, the basic outline of a partnership will be converted to an affiliation agreement, and physicians in both organizations will design how care will be delivered locally in each clinical area.

“We’ve spent so long at this, I’d be surprised if there was something we didn’t already know,” he told HCN. “Nonetheless, our physicians will be talking with physicians at Mass General, field by field, to identify opportunities to use resources to improve care in this community.”

During this period, the state attorney general’s office, the state Trade Commission, and perhaps other state and federal agencies will look carefully at the merger in light of price concerns and other factors, Melin said, again, trying to ease some initial public concerns about competition and local control.

“We are going to be coordinating in a regional way with our regional partner and drawing on outside resources to help us provide care,” he said. “I’m not sure people choosing where to get care are basing it on the ownership [of the hospital]; they’re asking, is the quality of care good, is the health of the community better because of the resource-delivery system it provides, and is it affordable?”

Leaders at Cooley Dickinson Hospital hope they’ll be able to answer yes to all three. But in the meantime, there’s plenty of work to be done.