Eastern Maine Healthcare Systems and Portland’s Mercy Health System of Maine moved one step closer to merging Monday by inking a deal more than a month after initially announcing their plans to join forces.
EMHS and Mercy signed a “definitive agreement” in which Mercy and all of its divisions, including VNA Home Health and Hospice, will be integrated into the Brewer-based EMHS, according to a news release from the organizations.
The health systems signed a non-binding letter of intent on Dec. 7, after Mercy’s planned deal with Steward Health Care System, a for-profit Massachusetts hospital chain, fell through.
The agreement, signed Monday morning, was not released. Officials from Mercy and EMHS said Monday that it was premature to discuss the deal’s terms, though the agreement eventually will become public record through the regulatory approval process. With the agreement now signed, Mercy and EMHS will seek a certificate of need from the Maine Department of Health and Human Services, federal antitrust clearance and, because Mercy is a Catholic health organization, the approval of the Vatican.
The process is expected to take six to nine months.
The agreement spells out the steps both health systems will take for Mercy to become an EMHS member. A local board will continue to provide oversight of Mercy, according to the release.
The proposed merger has sparked curiosity about why EMHS, parent organization to Bangor’s Eastern Maine Medical Center, wants to expand its reach beyond northern, central and eastern Maine. The merger would bring EMHS into the backyard of MaineHealth, parent of Maine Medical Center, Mercy’s main competitor in Portland.
EMHS wasn’t looking to plant stakes in southern Maine, but seized upon the opportunity to partner with Mercy when it arose, M. Michelle Hood, president and CEO of EMHS, said Monday.
“The more we discussed the potential of the affiliation, the clearer I think it became that this would provide us with additional ability to reshape the health care delivery system across the state,” she said in an interview.
Mercy’s strong network of primary care providers fits well into EMHS’ mission to improve the health of Maine people by offering high-quality and cost-effective health services in their communities, Hood said.
Beyond the deal with Mercy, it’s not EMHS’ intent to expand further into the Portland market, she said.
Both EMHS and Mercy are working towards a model in which groups of health providers, broadly known as “accountable care organizations,” seek to better coordinate patients’ care and treatment for chronic diseases. Under the model, formalized under the federal health reform law, providers’ compensation is tied to the quality and value of care they offer, not how many procedures they perform.
Merging with EMHS will give Mercy more resources toward that end, said Eileen Skinner, president and CEO of Mercy Health System of Maine.
“Even though it seems maybe a bit counterintuitive to partner with a system that’s outside of Portland, it actually makes a lot of sense because you can get local scale in addition to the accountable care scale and you can serve the community by providing choice,” she said.
Mercy had been trying since August to reach a deal with Steward.
In a confidential memo that came to light shortly after Mercy announced the deal’s collapse, Chris Murphy, Steward’s media relations director, called Mercy’s finances into question. He wrote that the Boston-based company “unilaterally withdrew” from negotiations after determining that “many representations made by Mercy about their financial condition, capital structure and business projections were unreliable.”
Mercy disputed the memo’s account of the negotiations, saying the parties were unable to reach an agreement and that Mercy never misrepresented its finances.
EMHS has full confidence in Mercy’s financials, Hood said.
“We are absolutely satisfied and comfortable after a very extensive amount of due diligence, with access to everything that we have asked to look at, that there is nothing hiding in the financials of Mercy that will be a surprise to us,” she said.
Skinner reiterated Monday that Steward’s claims were inaccurate.
“We had a pretty simple process of agreeing that we were not going forward and why they said those things I’m not really sure,” she said.
EMHS has said Mercy, a member of Pennsylvania-based Catholic Health East, would maintain its Catholic identity under the agreement. If the deal goes through, Mercy would become the only Catholic hospital organization in Maine that’s member of a secular hospital organization.
Mercy runs the 230-bed Mercy Hospital in Portland as well as a newer health care campus on Portland’s Fore River. The Mercy system also operates VNA Home Health Hospice in South Portland, an addiction treatment center in Westbrook and primary and urgent care centers.
EMHS is the parent company of seven hospitals in Maine, including Eastern Maine Medical Center in Bangor, and operates several nursing homes and hospice organizations.
EMHS will welcome Mercy’s management team into its leadership structure, Hood said.
The proposed merger has raised concerns that EMHS, by competing directly with MaineHealth, could duplicate health services in the Portland area, leading to higher health care costs.
Competition helps to keep hospitals “on their game,” but today’s complicated health care landscape — with federal health reforms under the Affordable Care Act and strained state and federal budgets — also pushes health systems to collaborate to improve patients’ health, Hood said.
“In the past, competition in health care was always about more technology and more buildings,” Skinner said. “I think competition has changed dramatically. It’s more about the kind of care, where it’s provided, the value, the cost, and more of a population health model.”
Competition serves as a catalyst to innovations in health care that will ultimately lead to a healthier Maine, Hood said.
“MaineHealth and EMHS have very similar views of what the end game is,” she said. “To the extent that we can continue to collaborate around that and drive each other as the two largest systems in the state to accelerate the pace of that change, the better everybody will be.”