PORTLAND, Maine — Mercy Health System of Maine, based in Portland, has scrapped its plan to merge with a for-profit health care company in Boston and has instead signed a letter of intent to merge with Eastern Maine Healthcare Systems of Brewer.
The two health care systems have begun the due diligence necessary to ensure a good fit between the organizations, Susan Rouillard, Mercy’s chief development and communications officer, told the Bangor Daily News on Friday evening.
Terms of the potential deal are not being disclosed, Rouillard said.
“I can tell you that Eastern Maine is a very good fit for Mercy, and Mercy is a very good fit for Eastern Maine,” she said. “[EMHS] is one of the pioneer accountable care organizations — it’s one of only 32 in the nation. That ties in very well with Mercy’s effort to provide higher value care at lower cost.”
Mercy, which is a member of Pennsylvania-based Catholic Health East, includes two flagship hospitals in Portland and several health care facilities in southern Maine. If it merged with EMHS, Mercy would retain its Catholic identity, legacy and nonprofit status, according to a media release.
EMHS is the parent company of seven hospitals in Maine: Eastern Maine Medical Center and Acadia Hospital, both in Bangor; Blue Hill Memorial Hospital; C.A. Dean Memorial Hospital in Greenville; Inland Hospital in Waterville; Sebasticook Valley Health in Pittsfield; and the Aroostook Medical Center in Presque Isle.
Rouillard said the next step would be for the two organizations to come to a definitive agreement, after which the organizations would seek state regulatory approval. Mercy and EMHS said they would keep their communities and stakeholders informed as these discussions reach significant milestones.
“We’re hoping this will all move along quickly,” Rouillard said.
Suzanne Spruce, director of community relations for EMHS, said the nonbinding letter of intent was signed Friday afternoon and both parties hope to reach a definitive deal by the end of the year.
The news of the proposed merger raises more questions than answers for Andrew Coburn, a rural health care expert and associate director of the Muskie School of Public Service at the University of Southern Maine.
Coburn, reached in an airport on Friday night, was surprised by the announcement.
“I don’t know exactly what it means,” he said. “I think the key question is why would Eastern Maine be interested in having a small community hospital in Portland? It’s somewhat unusual.”
From Mercy’s point of view, merging with EMHS would allow the hospital to attach itself to an entity that has been innovative in developing its health care system, Coburn said.
“But I don’t understand the fit and I don’t think we’ll know that until either party starts talking about why this makes sense for them,” he said.
What is clear, he said, is that this move would allow EMHS to plant stakes in the backyard of MaineHealth, the parent company of Maine Medical Center in Portland.
When asked how significant that move would be, Coburn was cautious with his response. “I’m not sure. It’s hard to know,” he said. “It could mean there is more competition or more collaboration in the marketplace, but I don’t really know.”
Until as recently as Wednesday, Mercy had maintained that it was still in talks to merge with Steward Health Care LLC, a for-profit health care company based in Boston. Rouillard said on Friday that Mercy and Steward have decided to no longer explore that option.
“Upon enacting the nonbinding letter of intent, Steward and Mercy entered into a period of exclusive negotiations but were unable to come to a definitive agreement,” a separate media release from Mercy said. “As a result, the letter of intent is terminated.”
This is the third deal to fall through for Steward, which is owned by Cerberus Capital Management, in the past year-and-a-half. In September, its deal to acquire Landmark Medical Center in Woonsocket, R.I., collapsed. In May 2011, its deal to purchase a chain of hospitals in Florida also fell through.
Cerberus Capital Management also owns the NewPage mill in Rumford, which is currently in bankruptcy proceedings.
BDN health editor Jackie Farwell contributed to this report.