Squeezed tightly by the high cost of doing business at a time when federal reimbursements don’t cover expenses and more patients need free care, Maine’s hospitals are looking to each other to survive.
Hospital mergers, consolidations and collaborations have been occurring for the past 20 years, but the trend has accelerated during the past five years, experts said.
“What’s happening in Maine is not unusual or unique,” said Andrew Coburn, research professor of public health at the University of Southern Maine in Portland. “The consolidation trend is happening throughout the country.”
Coburn likened hospital consolidations to the automobile industry. Successful car companies early on bought their parts suppliers, just like hospitals bought companies offering home care, blood labs and other services. When the car companies failed, they merged, just like some hospitals are doing now.
As they combine, some hospitals disappear and turn into clinics, while others expand their geographical reach in an effort to improve the quality of care and cut costs.
“[Several] hospitals have stopped operating as hospitals and are now community health clinics,” said Jeffrey Austin, vice president of government affairs and communications at the Maine Hospital Association.
They are Parkview Adventists Medical Center in Brunswick, now part of Mid Coast-Parkview Health; St. Andrews Hospital in Boothbay Harbor, now part of LincolnHealth; Thayer Hospital in Waterville, now part of MaineGeneral Health of Augusta; and Goodall Hospital in Sanford, now part of Southern Maine Health Care.
Maine has 36 private hospitals, most of which are nonprofit. It also has three major health care systems that include hospitals, clinics, blood labs, home care and other services.
They are MaineHealth in Portland, which includes 11 hospitals and is the largest health network in Maine; Central Maine HealthCare in Lewiston, with three hospitals; and Northern Light Health in Brewer, with nine hospitals. In addition, other hospitals and health practices have consolidated in recent years.
Austin also is concerned about the number of hospitals operating at a loss.
“The more troubling, concerning data point is 25 percent of our members have been operating in the red for at least five consecutive years,” he said. “You’re going to bleed down your available cash, and we’ve seen that. It’s tough out there.”
That trend hit home in January when Penobscot Valley Hospital in Lincoln filed for bankruptcy protection with up to $10 million in debt. The hospital still is operating as administrators search for a way to rectify the situation.
“There is a direct connection between regional economic conditions and declining revenue at Penobscot Valley Hospital,” Crystal Landry, CEO of the hospital, wrote in a January commentary for the Bangor Daily News.
The Lincoln Paper closure meant hundreds of people lost their jobs and health insurance. Some moved out of the area.
“Since 2015, we have seen a 65 percent drop in admissions and a 10 percent overall drop in total patient volume,” she wrote.
Austin said that while a lot of money can flow into health care and hospitals, all that money flows right back out in the form of salaries, prescription drug costs and compliance with regulations.
“The aggregated operating margin for all the hospitals in Maine is about 1 percent,” he said.
Hospitals are looking for economies of scale, to spread out their networks to attract more patients and to be more attractive to potential staff, which are difficult to recruit to a rural state like Maine, he said.
Combining to survive
At the heart of consolidations is the effort to preserve local access to health care for patients, assuring quality care and reducing operating costs, said Lois Skillings, CEO of Mid Coast-Parkview Health.
“In a small population state with a large geography like Maine, we need to think of health care not like a commodity, but like a scarce resource, a delicate ecosystem that needs protecting,” she said. “We need to think of coming together in more of a collaborative than a competitive way.”
Among the other root causes behind mergers and consolidations that she cited are the increasing complexity of providing health care, technological advances that are too expensive for smaller hospitals to adopt on their own, economies of scale, lower federal reimbursements, higher numbers of patients who can’t afford care and the ability of a larger hospital system to attract medical staff.
A larger hospital system that can include more inpatient beds, emergency services, specialty care and walk-in clinics also is spread over a larger geography. That can give a smaller hospital access to more patients and in turn to more services for its own patients.