Hospitals fight to hold on to independence

When Underwood-Memorial Hospital in Woodbury and the South Jersey Health System of Vineland announced their merger agreement this month, the deal was pegged as an example of a new round of hospital consolidation that could eliminate the region's remaining independents.

Financial pressures from government and private insurers to deliver better care for less money, coupled with the current downturn in health-care spending caused partly by the weak economy, have forced some institutions to consider whether the time has come to give up their cherished independence.

"I think in the next few years the economic environment is going to be extremely hostile to these smaller places," said Alan Zuckerman, president of Health Strategies & Solutions, a Philadelphia consulting firm.

"I don't think they can reasonably survive as independent entities," Zuckerman said. "I understand they don't feel that way about it."

He added that the time frame for independents was "no more than five years, likely less than that."

In interviews last week, chief executive officers of several community hospitals expressed confidence that the members of their boards would fight to stay independent.

"They like the idea of being able to control the strategic priorities," even while "recognizing that it's a pretty tough landscape," said Michael J. Duncan, CEO of Chester County Hospital.

An Inquirer comparison of recent financial data from independent hospitals and several health systems found that independents had weaker revenue growth and narrower profit margins from operations, a key measure of how efficiently a hospital provides services. The measure excludes income from investments.

Few independent general hospitals remain in the Philadelphia area. Most joined systems during a wave of consolidations in the 1990s.

The largest holdouts tend to be institutions relatively far from Philadelphia, such as Doylestown Hospital; Grand View Hospital in Sellersville, Bucks County; and Chester County Hospital in West Chester. Their locations have provided some insulation from the competition of powerful academic medical centers in the city, such as the Hospital of the University of Pennsylvania and Thomas Jefferson University Hospitals.

Montgomery County's Holy Redeemer is close to the city, but it is unusual because it has diverse operations beyond its 263-bed hospital in Meadowbrook. There are three small independent hospitals in the city itself: Kensington, St. Joseph's, and Roxborough.