Hospital merger changes more than name

Much more than names will change when Fanny Allen Hospital, the Medical Center Hospital of Vermont, and University Health Center merge early in the new year to form a single entity called Fletcher-Allen Health Care.

All the involved parties agree that the effect will be far-reaching in terms of administrative operations. The three participating institutions will cease to function as separate entities, with nearly all their decision-making powers being ceded to the new consolidated corporate structure.

Bureaucratic procedures are also likely to undergo major revisions. A primary aim of the merger, according to all concerned, is to eliminate duplication of record-keeping and thus reduce paperwork. In addition to controlling costs, this streamlining of information systems is intended to improve efficiency in the delivery of medical services.

At the same time, several key figures behind the merger suggest that the move will have little impact on direct patient care, at least initially. Vermonters going to any of the three formerly separate facilities will probably discern no difference in treatment, officials say.

But managers of the Chittenden County health care establishment also acknowledge that all the changes resulting from the merger are not entirely foreseeable at this stage. Fletcher-Allen Health Care expects to adjust aspects of its operations as the consolidation matures, said Dr John Frymoyer, chief executive of the new entity.

A reduction in the size of the combined workforce is among the developments almost certain to occur in the coming years. The three institutions together employ some 4,500 workers. That total is planned to shrink as a result of heightened efficiency and cost-cutting initiatives, but officials are reluctant to specify targets or timetables. They do express hope that much of the job loss will be achieved through attrition rather than actual layoffs.

Shifts in relationships with other Vermont medical facilities may result from the merger as well. Copley Hospital in Morrisville, for example, has already begun to explore an alliance-type arrangement with Fletcher-Allen Health Care. Over time, speculates Peter Holman of the Vermont Hospital Association (VHA), it is possible that other health care organizations in the northern part of the state could likewise enter into some sort of cooperative compact with the Burlington-area colossus.

Holman, a vice president for planning at VHA, also points to limits in the current tendency to consolidate resources. "There is value in retaining some local representation," he said. Citing dangers in a hypothetical move toward creating just one or two health care systems in the entire state, Holman suggests that under such a scheme "you could well end up with a bureaucracy where communities would be perceived to be left out, or in fact be forgotten about."

The need to compete more effectively in certain spheres with the region's other medical giant, Dartmouth-Hitchcock Medical Center in Lebanon, NH, was among the motives spurring the decision to form Fletcher-Allen.

James Taylor, president of the Medical Center Hospital of Vermont (MCHV), downplays this factor, saying that the two institutions generally do not engage in turf battles. But Taylor and other some Vermont health care officials acknowledge that the relative proximity of Dartmouth-Hitchcock did influence the four-year planning process that led to the creation of Fletcher-Allen.

National trends in health care were far more important in driving the decision to merge, according to leading participants. "The key thing," said Henry Tufo, president of University Health Center (UHC), "are the changes that have taken place in the medical marketplace in the past few years."

As part of an increased emphasis on containing costs, hospitals across the country are facing the necessity of operating in accordance with a fixed revenue base. The growth of managed-care arrangements are adding to the pressure to hold down costs. Today, said Taylor of MCHV, "the imperative from a financial perspective is to manage costs, whereas in the past it had been to generate revenues." This, he adds, is "a major difference requiring us to think more systematically in providing care."

A merger was found to be essential in bringing all segments of the system into closer alignment, explained Tufo of UHC. "What's good for doctors and good for the hospitals and patients now has to be exactly the same."

Previously, Tufo continues, "it didn't matter to doctors how long a patient stayed in the hospital" as long as physicians were satisfied with the treatment provided. "Conversely, if a hospital needed to lower costs, it didn't matter if that made doctors' lives very inconvenient," such as by scheduling surgery at 6 am, Tufo observed.

Under the new approach, doctors are given responsibility for carrying out the budget they help formulate. That should make quality and cost considerations fully congruent, Tufo said.

Some doctors worry, however, that the increasing emphasis on efficiency may lead administrators and insurers to intervene in treatment decisions. But Tufo assured that the new structure has been designed to maintain such decision-making authority at the "point of contact" between physician and patient.

The merger will actually help remove impediments to high-quality patient care, the UHC president added. "The duplication of almost every system" of record-keeping and of other administrative functions slowed response time and produced bureaucratic snarls, Tufo noted. MCHV President Taylor agreed, saying, "Some of the reason we haven't been able to do as well by people as they like is because of barriers" obstructing the flow of information and complicating administrative functions.

A few outsiders question, however, whether the consolidated institution may come to exhibit the same bureaucratic sclerosis that has afflicted other large corporate organizations.

"This isn't a situation in which consolidation just produces more of the same," responded Holman of the Vermont Hospital Association. Each of the merged units brings distinctive service expertise into the new mix, he said. Besides, the health care system "is shrinking overall," Holman said, "so the likelihood that a bureaucratic mentality could take over here is minimal."

Added Fletcher-Allen chief Frymoyer: "We've spent an enormous amount of time in putting this whole design together to make sure that it doesn't become bureaucratized."

Electronic data exchange and "a better continuum of care and follow-up" are definite advantages of the new institutional structure, said Jeanne Keller, head of the Vermont Employers Health Alliance. The "holy trinity" of health care planning--quality of services, access to care, and limits on cost--could be well served as a result of the merger, Keller said.

But some critics argue that the new setup will do little to enhance the overall effectiveness of Chittenden County's health care system. All the effort put into engineering the merger "diverts attention from what we need to be doing in establishing outcomes concerning disability-free life spans," said Stuart Friedman, a leader of the Vermont Consumers Campaign for Health. "What goes on up there on the hill has very little to do with that, and I highly doubt that this is going to change."

Friedman's advocacy group campaigns in favor of a Canadian-style, single-payer health insurance system. It also emphasizes the importance of preventive and holistic health care.

Frymoyer insisted, however, that the merger will enable providers to "put in place better ways of understanding unmet health needs" in the surrounding communities. This will include greater attention to preventive treatments, Frymoyer promises.

A number of outsiders meanwhile express concerns about the vertical monopoly established as a result of the merger. About 95 percent of the doctors in Chittenden County will be under contract with Fletcher-Allen, estimated Keller of the employers' alliance.

"Will pricing be controlled and non-competitive?" under the new configuration, asked John Baakes, president of the Community Health Plan. This Chittenden County health-maintenance organization will itself be generally unaffected by the move, Baakes said, since it has been operating under a joint agreement with MCHV and UHC.

Friedman is sure an "inevitable clash" will occur "as suppliers become more unified." Individual consumers, he said, "won't be able to affect what's produced and the price of what's produced."

Keller sees such an outcome as possible, though not foreordained. "We still have a multi-payer system," she observed, "and we don't want a situation where one person on the hill is saying, 'here's the price--take it or leave it'."

Concentration of the sort represented by Fletcher-Allen is typically restrained either through government regulation or democratic means, Keller said. Utilities that enjoy monopoly status are subject to price control on the part of government agencies, she noted. An alternative way of insuring a public role in pricing decisions is by holding open elections of board members or by mandating that elected officials serve on the board.

"There's nothing intrinsically wrong with the new corporate structure," Keller said, "but the burden is on them to show they can deal with these accountability issues since they've created a monopoly."

Frymoyer and other health care executives say they are aware of these concerns and will work to ensure public accountability in the new structure. Steps to achieve that result have yet to be specified, however.

Fletcher-Allen's board will consist of 18 members. Each of the four institutions joined in the new enterprise--MCHV, Fanny Allen, UHC and the University of Vermont--will appoint four members. They, in turn, will elect a board chair from their ranks, whose regular membership seat will then be filled by the sponsoring institution. Frymoyer, as chief executive, also sits on the board.

UVM's involvement stems partly from its medical school's relationship with Fletcher-Allen. Frymoyer, who will continue serving as dean of the medical school, predicts that it will benefit markedly from the new corporate arrangement. Students will need to "learn a new system of health care," he noted, "and this is a very good place for them to learn it."

The merger will likely lead to greater security in regard to the medical school's income sources, said Baakes of the Community Health Plan. "Medical school financing in many cases is getting more difficult," he said, "and this should be a positive development in this case."

Representation on the Fletcher-Allen board was also designed to preserve at least a vestige of the individual identity of the various health care facilities. The need to retain distinctive cultural characteristics may be most acutely felt in the case of Fanny Allen.

The Colchester hospital was founded 100 years ago as a religious institution. It has continued until now to operate under the auspices of the Religious Hospitaliers of St Joseph, although that order's nuns presently account for only about six of Fanny Allen's 300 employees.

Despite the fact that Fletcher-Allen will supplant Fanny Allen, the agreements establishing the new entity "were negotiated to respect the Catholic identity of the campus and to support its maintenance," said Fanny Allen's president John Cronin. In accordance with this arrangement, personnel at his facility will not be expected to participate in the provision of services, such as abortion, that are contrary to their religious beliefs.

By focusing on three categories of services--elder care, rehabilitation, and ambulatory care--the former Fanny Allen institution will also remain somewhat distinct from the Burlington-based components of Fletcher Allen.

Frymoyer, who will oversee the whole operation, stresses that time and experience will do much to shape Fletcher-Allen's own identity and procedures. James Taylor, the head of MCHV, agreed: "There's nothing magic about all this," he said. "It's going to take a lot of hard work to make it happen. And it's certainly not all going to happen the day we open."

Kevin Kelley is a freelance writer from Burlington.

Copyright Lake Iroquois Publishing, Inc. d/b/a Vermont Business Magazine Dec 1994
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