A healthy association? | nnbusinessview.com

A healthy association?

John Seelmeyer

Saint Mary’s finds itself caught in a squeeze between modern-day fierce competition and ages-old spiritual calling as it considers a possible merger with Catholic Healthcare West.

On one hand, says the health care system’s top executive, Saint Mary’s has struggled to win the managed care accounts that provide a steady stream of patients.

At the same time, Dominican Sisters of San Rafael, the sponsor of Saint Mary’s since its inception 98 years ago, want to be certain that the mission of Saint Mary’s will continue to shine, even if the Dominican congregation somehow is unable to carry on as its sponsor.

The proposed merger of Saint Mary’s into Catholic Healthcare West a San Francisco-based nonprofit with net operating revenue of $6.7 billion in its most recent fiscal year appears to answer both concerns, says Larry O’Brien, chief executive officer of Saint Mary’s.

On one hand, he says, the affiliation with a much larger organization gives Saint Mary’s the access to capital it will need to serve northern Nevada.

“It’s not about surviving,” he says. “It’s about thriving.”

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A merger with Catholic Healthcare West also would provide more muscle in negotiations with managed-care providers.

Saint Mary’s, O’Brien acknowledges, has struggled to win some of those major accounts. Competition between Saint Mary’s and Renown Health formerly Washoe Medical Center has been fierce.

A hard blow came early this year when Public Employees Benefit Program didn’t include Saint Mary’s as a preferred provider organization for employees of state and local governments.

Even before that contract came up for bid, Saint Mary’s executives argued strenuously for open healthcare contracts that allow patients more choice about the hospitals they use.

Catholic Healthcare West’s 41 hospitals, most of them in northern California, include St. Rose Dominican Hospitals in southern Nevada. That may provide more leverage on statewide contracts.

A merger also would provide greater economies of scale when Saint Mary’s purchases everything from routine supplies to recruiting services, O’Brien says.

“It’s been hard for stand-alone hospitals,” he says.

Important as the financial considerations may be, the spiritual match between the two organizations was far more critical, the Saint Mary’s CEO says.

The Dominican Sisters established Sister’s Hospital in Reno in 1908 a handful of the sisters had been working the remote community since 1877 and the institution became known as Saint Mary’s in 1912.

As the hospital grew, the Dominican Sisters remained close to its operation. Four of the sisters sit on Saint Mary’s 16-member board of directors.

In fact, Sister Patricia Simpson, the prioress general of the Dominican Sisters of San Rafael and a member of the Saint Mary’s board, also serves as chair of the top governing board of Catholic Healthcare West.

Catholic Healthcare West is overseen by seven congregations of sisters.

Saint Mary’s had used Catholic Healthcare West’s assistance during a strategic-planning process, and the Reno hospital had joined a group-purchasing organization with Catholic Healthcare West.

At the same time, O’Brien and the Saint Mary’ board were looking at possible partners, including all of the Catholic healthcare systems in the western United States.

“Clearly, the best partner for Saint Mary’s was CHW,” O’Brien says. “A lot of what they’re about, and what we’re about, is mission.”

After the two organizations signed a letter of intent to merge, both now undertake extensive due diligence. Although Saint Mary’s executives think the deal might be done by the end of the year, there’s no firm timetable.