Hospital leaders weigh mergers

Mergers may be necessary to ensure long-term viability and to better serve communities, hospital CEOs said at a Wisconsin Health News panel Tuesday.

Dr. Scott Rathgaber, Gundersen Health System CEO, said their merger talks with Marshfield Clinic Health System are in part to ensure their future viability as surrounding systems get bigger.

He thinks they will be fine in the next three to five years, but he’s not sure about the next 15 to 20.

“Unfortunately, size does matter when you talk about being competitive long-term,” he said.

While Gundersen has considered increasing their size through growth or joint ventures, Rathgaber thinks a merger would position them best to preserve their model of care.

He said that having that conversation with Marshfield Clinic Health System is “natural” given the rural systems’ similarities. Both are still weighing whether joining together is right for them, he added.

Damond Boatwright, SSM Health Wisconsin president, said those pursuing mergers need to have strong reasons for doing so and know why they’re looking at partnerships.

“I would not say in absolute terms that simply getting bigger is better,” he said. “You really want to create value.”

He said that healthcare organizations should seek out partners that either enhance or complement the services they provide.

As an example, he pointed to the system’s partnership with Agnesian HealthCare, which expanded SSM Health’s reach to Fond du Lac and Monroe.

Luke Beirl, CEO of Hayward Area Memorial Hospital, said that consolidation, acquisitions and mergers have looked different in northern Wisconsin compared to southern Wisconsin given the small volume of patients.

“When you’re operating with such small volumes, your denominator is so low that you have to operate with a very, very precise operational model,” he said. “That one experience when your denominator is 10 is a lot different than that one experience when your denominator is 1,000.”

Beirl said that his independent hospital closely examines what it can do, what it can’t and whether a partnership will create value.

He said Hayward Memorial works with two outside groups to provide primary care, including a local community health center.

“We’ve consolidated relationships to say: ‘How do we value local care the same way to serve the needs of the broader community and how do we create channels with those systems or those tertiary centers that are going to allow our patients and our community to receive the best possible care when it’s beyond the scope of what we should be doing?’” he said.

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