Allegan hospital's plan with Ascension is part of decades-long trend

By: 
Ryan Lewis, Editor

Allegan Healthcare Group Inc. announced Friday, Jan. 4, it intended to join Ascension Michigan, having signed a non-binding letter of intent.

Representatives for both organizations said there was no further comment at this time regarding when the deal would be finalized, the money involved or details about individual facilities or employees.

Sam Watson is the senior vice president for field engagement at the Michigan Health and Hospital Association. While he couldn’t comment on this specific deal, he said letters of intent, broadly speaking, function as a public notice.

“They essentially say that the two organizations are conducting due diligence to see if it’s a right fit to come together,” Watson said. This process involves examining the financial, staffing and facility information.

“Joining” is likely being used to describe the deal specifically because the arrangement likely is still being determined.

“There is such a range of what could end up happening,” Watson said. “Mergers of all kinds can range from simply jointly operating things all the way to one owning another. Most organizations are vague on what’s going to happen as they go through this process.”

 

The hospitals

The independent, nonprofit Allegan Healthcare Group includes the 25-bed Allegan General Hospital, a critical access hospital; Allegan Professional Health Services Inc.; and the Allegan General Hospital Foundation. The system has 17 employed primary care providers and an array of ambulatory services across Allegan and Van Buren counties.

Allegan General Hospital recently received a Level IV Trauma Center designation.

The faith-based Ascension Michigan operates 15 hospitals— including Ascension Borgess in Kalamazoo and Borgess-Pipp Hospital in Plainwell—and hundreds of related health care facilities that together employ more than 20,000. Ascension Michigan is part of Ascension, the nation’s largest nonprofit health system.

 

Pressure to merge

Watson said mergers between health systems have been the trend since the 1980s.

“Speaking about the broader market, we had 200 hospitals then. Now, due to mergers, closings and consolidation, we have 133 now,” Watson said. “So, this has been happening right along.”

He said decreasing reimbursement from health insurers has driven that change.

“Because of that, hospitals typically have less capital to invest,” he said.

The challenge for rural hospitals such as Allegan’s is also about staffing.

“Especially in rural areas, recruiting physicians becomes more of a challenge,” Watson said. “So, hospitals will also come together to make sure critical services are available.

“That’s important because you need a local ER, outpatient care, etc. Keeping those important services and personnel along with the latest equipment can present more challenges for rural hospitals.”

He said on top of that, there are also decreasing numbers of physicians and nurses.

“So, overall, joining forces can help both organizations maximize services and reduce costs,” he said.

 

Next

Watson said this period of due diligence can last several months or he’s seen it last a year.

“Plus, there’s also an element of whether or not it’s a good cultural fit. And the length of time depends a lot on how complex both partners are.

As for staff cuts, he hasn’t seen major staff reductions after mergers, broadly speaking.

“Typically you have a finite quantity of nurses and other health care professionals,” Watson said. “Hospitals are usually working as hard as they can to get people in. Certainly some deals might move personnel from one location to another. That’s going to be very situational.

“They will take a very methodical approach because it’s an important decision for any organization,” he said.

Allegan General Hospital president and CEO Gerald J. Barbini sounded confident the deal would be a good fit.

He said, “We are very proud to become part of the Ascension system. Our missions are very compatible and together we will continue to provide outstanding health care to our community.

“This partnership will significantly enhance and improve all health care services available to residents in the Allegan area.”

The transaction would be subject to customary regulatory approvals and closing conditions.

Contact Ryan Lewis at rmlewis@allegannews.com or (269) 673-5534.

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