6/2/2016

Report: Medford's Lawrence Memorial Hospital would likely close if Hallmark Health merger fails - Gate House

Print P

By Alex Ruppenthal

age

August 06. 2015 12:52PM

Report:Medford'sLawrenceMemorialHospitalwouldlikelycloseifHallmarkHealth
mergerfails
Hallmark Health would likely close Lawrence Memorial Hospital if the company and Partners HealthCare fail to
restructure a merger that was rejected earlier this year by a state superior court, according to documents filed by
Hallmark with the states Health Policy Commission in 2014.
In a letter dated Aug. 1, 2014, responding to an HPC report that raised concerns about the proposed deal, Hallmark
concluded that without the transaction, it would be forced to make significant reductions in the locations and types of
services that it provides to the residents of its communities. These reductions would likely include closure of the LMH
campus entirely and the termination of all its services.
LMH remains open despite the Suffolk Superior Courts rejection of the proposed merger between Hallmark and
Partners, which was announced in a Jan. 29 ruling that said the deal would have increased healthcare costs and Hallmark Health CEO Alan Macdonald
discussed the future of the organization
created an unfair market advantage for Partners, already the states largest healthcare provider.
withmembersoftheMedfordandMalden

Hallmark and Partners disagree, and Hallmark CEO Alan Macdonald told members of the Medford and Malden ChambersofCommerceduringaJuly23
meeting.
Courtesy
Photo/Malden
Chambers of Commerce during a July 23 meeting that he hoped the companies would still be allowed to merge.
Its really necessary for us pretty soon, Macdonald said after the meeting, held at LMH. I dont think its that far
away that were going to be able to say, Heres our network for the next generation, and then the investment comes.

ChamberofCommerce

This spring, Hallmark and Partners said they were continuing to discuss a partnership but said plans to merge were on pause.
As of last month, the status was unchanged.
Were in a pause period reflecting on next steps but continue conversations about how our two organizations can best work together in the future, Partners
Vice President of Communications Rich Copp said.
Asked if Partners still planned to acquire Hallmark, Copp declined comment and referred to the above statement.
Hallmarks hope remains to merge with Partners, Macdonald said.
We dont have a deadline on it right now, but we continue a series of conversations on how it would benefit the community, he said. But it hasnt come
together as one specific plan.
Hallmark says it requires critical infrastructure investments throughout its system, including at LMH, which opened in 1924, and that the company needs help
to afford the investments.
In its August 2014 letter to the HPC, Hallmark said it faced significant financial challenges and had implemented significant cost-savings initiatives in fiscal
2014 after seeing a 23 percent decline in patient discharges at LMH and Melrose-Wakefield Hospital over the previous two years.
Hallmark also challenged the conclusion reached by the HPC that financial distress was not a motivating factor in its decision to affiliate with Partners. After
receiving analysis from healthcare consulting firm Kaufman Hall, Hallmark concluded that the required expenditure of funds to modernize its facilities and to
install a comprehensive electronic health records system would surpass all of Hallmarks cash reserves.
The only way for the company to survive, Hallmark argues, is to merge with another healthcare provider, namely Partners. In fact, in the companys letter to
the HPC, Hallmark said it had determined that it does not have the financial wherewithal to continue operations as a standalone community healthcare
system.
If the Partners merger does not go through, Macdonald said he did not know what would happen to LMH.
Theres no definite future if we have to do a different plan, he said.
The HPC, an independent agency that monitors the states healthcare market and provides data on the impact of healthcare mergers, along with
recommendations to the states Attorney General, did not agree that Hallmark needed the merger to survive.
Based on its examination of Hallmarks financial position, planning documents provided by Hallmark and Partners and the companies estimates of
Hallmarks independent capital needs, the HPC wrote: We find the above described position is not well-supported.
Since the initial deal was rejected in January, Macdonald said Hallmark has had limited contact with the office of Attorney General Maura Healey, who has,
like the HPC, also expressed concerns over Partners desired expansion.

http://medford.wickedlocal.com/article/20150806/NEWS/150807850/?template=printart

1/2

6/2/2016

Report: Medford's Lawrence Memorial Hospital would likely close if Hallmark Health merger fails - Gate House

We talked a couple of times during the earlier part of the year, but not in the past month or so, Macdonald said, adding that Hallmark and Partners still talk
often despite statements by both that plans for a merger are on pause.
As of last month, Healeys Deputy Press Secretary, Jillian Fennimore, said Hallmark and Partners had not filed paperwork for a revised merger.
The AGs office is committed to ensuring that these kinds of transactions do not negatively impact the people of Massachusetts, such as limiting accessibility
and driving up costs for healthcare services, Fennimore said in a statement. We will evaluate proposed mergers with those concerns in mind, but currently
there is no active proposal on the table for review.
LMHtransitiontoshortstaycare
Under the initial merger that was rejected in January, Partners and Hallmark planned to reduce the bed count at LMH from 132 to a 30-40 bed facility for
ambulatory care and short-stay inpatient care lasting three days or fewer, according to the HPCs 2014 report.
Plans called for LMH to house an urgent care center and certain expanded outpatient services, such as cardiology, gastroenterology, chronic disease
management and spine services.
The proposed merger included $107 million in estimated capital expenditures at LMH, including a medical office building to house chronic disease programs
that would serve patients from across the North Shore.
Partners and Hallmark also committed to keep LMHs emergency department open, during at least the transition period of LMHs conversion, which they
estimated would take 2-3 years.
The companies said their plan to transition LMH to a short-stay facility was based on data showing that 65 percent of emergency department cases at current
Hallmark facilities required one or zero emergency staff.
Partners and Hallmark believe that, in the long term, it would be in the best interest of these patients to offer urgent care services at LMH, a service with
considerably lower wait times and considerably lower patient and payer costs, the companies wrote. The reduction of ED [Emergency Department] volume
was compared to projected future demand for emergency services, and the appropriate bed need was established by sizing the future offering based on the
perceived future need of the community.
Additionally, Hallmark said it intended to maintain emergency services at LMH and that the companies would determine the level of emergency care to be
provided based on the needs of the community and patient safety priorities.
By converting LMH into a short-stay facility, the companies said they would reduce overhead expenses by $11 million to $15 million annually, according to the
HPCs report.
During Hallmarks July 23 meeting with the Medford and Malden Chambers of Commerce, Medford City Councilor Rick Caraviello expressed fears about
LMHs future.
People dont understand that this building is a lifeline in this community, Caraviello said. At 2 in the morning, when youre sick, you dont have time to run
into Boston. This is where you need to come.
Under the initial merger, Hallmark and Partners said they anticipated patients who received general acute care services at LMH would receive care at MelroseWakefield Hospital in Melrose, which is 5 miles from LMH.
Macdonald did not address the statement made by Hallmark in its August 2014 letter to the HPC that the company would likely have to close LMH if the
merger with Partners fell through.
He said Hallmark has yet to finalize plans for LMHs future, given that the company still hopes to merge with Partners.
We havent made any progress on specifics, Macdonald told chamber members. We have been working with the state on the idea of one license for the
parties that would make the investments. Were in fair shape quite frankly balance sheet-wise to make some investments. But wed like to make them with
another party as we look at what those plans are. The reluctance to go too far on our own right now is that we know we will be part of a larger network, and we
dont want to have to redo a few things when we get to that spot.
In reviewing the initial merger proposal, the HPC said it anticipated that services at Hallmarks facilities would be billed at higher rates after the merger.
While Partners has stated that the services rendered at these facilities will be community priced, licensure under [Massachusetts General Hospital] and
potential operation and staffing by MGH raise the likelihood that rates for these services will nonetheless increase, the HPC wrote.
Macdonald, meanwhile, said a merger between Hallmark and Partners would not increase healthcare prices in communities served by Hallmark.
To us, its going to save the system money because more people will be treated for primary and secondary care in their community rather than going into an
academic medical center [in Boston], he said. More people will be staying at home.
To accomplish a merger, Macdonald said Partners and Hallmark must convince the state namely, the AGs office that the deal would not inflate prices.
But he did not indicate that the companies were close to proposing a revised merger.
Their indication is that theyre interested in knowing as much as they can about what the future would be if this happens, Macdonald said of the AGs office.
But I really cant say there have been a lot of specifics about it.

http://medford.wickedlocal.com/article/20150806/NEWS/150807850

http://medford.wickedlocal.com/article/20150806/NEWS/150807850/?template=printart

Print P

age

2/2