For nearly 110 years St. Vincent's stood alone. Over the entire 20th century, Birmingham's oldest hospital looked out from its hilltop perch and watched as the city changed around it in dramatic ways. Complete with habit-clad Daughters of Charity walking the halls, it remained a solitary reminder of Birmingham's quainter past and retained – some might even say cherished – the image of a decidedly old-fashioned hospital.
So when St. Vincent's, the Birmingham hospital "where babies come from" announced a multi-million dollar, multi-facility merger with Eastern Health System only a few years into the new millennium, it took many Birmingham observers by surprise. "Empire-building" by hospitals is nothing new, of course – we've grown accustomed to the frequent changes of the guard – we just never expected to see it done by good old, reliable St. Vincent's.
In east Birmingham, another beloved hometown hospital was struggling. Since 1946, Medical Center East had served the communities of Irondale and Trussville. Originally called East End Memorial Hospital, its founders had secured financing by approaching the citizens directly – often by visiting local churches to make their case.
For almost 60 years, Medical Center East had grown with the community that built it and loved it. By 2000, however, it was clear that Medical Center East was financially on the ropes. Operating consistently in the red and with an already modest market share having been further eroded by geography and fierce competition, it appeared that the east side hospital might be done for.
For cash-strapped Eastern Health System – the parent organization for Medical Center East, as well as smaller hospitals in Blount and St. Clair counties – the choice to try and partner with a more fiscally-stable entity was fairly easy, but why would another hospital or hospital group want to partner with them? Neeysa Biddle, Executive Vice-President and COO of St. Vincent's Health System, explains that there were two platforms from which the case for the merger was made: "The first was that it is in line with our mission – to promote Catholic health care across our city and our area. The other was leverage. Gaining a greater market share gives a hospital system a better bargaining position with vendors, with insurers."
From a financial standpoint, the calculation was that as an independent hospital in an increasingly affiliated medical environment, their market share could conceivably be diminished to the point of irrelevance. By spreading out a bit, St. Vincent's could improve its chances of long-term viability. Then again, the financial concept was only the beginning of the analytical process. Of far greater concern was the compatibility of the two facilities.
When former St. Vincent's Hospital CEO Curtis James and former Medical Center East CEO Robert C. "Bob" Chapman began seriously discussing the possibility of a merger, they were building on a basic framework that had been erected nearly a decade earlier, during the mid-1990s. For financial reasons similar to those discussed above, St. Vincent's Hospital, Brookwood Hospital, and Medical Center East had attempted a merger, which would have created an entity called Alabama Health Services. Although the plan was ultimately derailed, the earlier talks had convinced many that there was more in common between the downtown Catholic landmark and the suburban small-town general hospital than immediately met the eye.
Neeysa Biddle points out that both hospitals were community-focused and had a small-town feel. Both were stand-alone entities with a loyal following. Both were committed to the struggle to bring high-quality health care to the poor. Finally, both hospitals' missions were motivated (openly at St. Vincent's, slightly less so at Medical Center East) by a strong faith component. It also didn't hurt that two of the Daughters of Charity serving at St. Vincent's had done their administrative residencies with Eastern Health Systems.
Still, aligning with a critically wounded hospital system would not just have to sound good to St. Vincent's. It would have to pass muster with Ascension Health – the Catholic health care giant in St. Louis that owns St. Vincent's. Marketing firms were hired. Focus groups conducted. The consulting firm Deloitte was brought in. In the end, it was found that the Medical Center East ship could still be righted, but only through some difficult choices as well as the economies of scale, increased market share ("synergies" as Deloitte calls them) that could be accomplished by the merger.
There was one last area of concern that had to be addressed. It would be the hardest.
"The thing that usually kills these deals is that the associates (staff) are unwilling," says John O'Neil, St. Vincent's Health System President and CEO. Could the staffs of the two hospitals, both with proud traditions, be successfully blended? If so, how? When asked how they went about determining the answers to these questions, the reply from Biddle is simple and direct, and delivered with a knowing smile: Sister Dinah.
Sister Dinah White is the Senior VP of Mission Integration at St. Vincent's Birmingham. She is a nurse. She is a Daughter of Charity. And she is a woman who knows how to get things done. Her first move was to recruit a core group of "mission champions" – staff members from both hospitals who could function as intermediaries between administration and the staffs at large.
Sister Dinah could have simply opened the Eastern Health System and St. Vincent's Hospital phone books and called the department heads. She didn't. She wanted leaders, and she didn't care about titles. She identified people who were acting as leaders in their departments, what she called "informal leaders", and took them on a week-long retreat to Prattville. What emerged at the end of the week was a strong commitment from the staffs of both hospitals to accomplish their mission – promoting Catholic health care across the city – and a new Associate Handbook to guide their colleagues through the coming transition. Sister Dinah ribbed the "formal" leaders when they went on a later retreat: "I already have my mission champions. Now you have to rise to their example".
With the staffs of the hospitals now on board, the administrators got to work during an initial 18-month management agreement. Of the 13 synergies identified by Deloitte, St. Vincent's has implemented 12 of them under the leadership of Kirk Allen, who left his prior position to become the VP of Business Development at the new health system.
O'Neal and Biddle are pleased with the initial outcomes metrics. Even after accounting for the initial increases in cost associated with the creation of a new system, the approximately $20M/yr deficit at MCE has been cut to approximately $5M/yr in 3 yrs. They also report that while St. Vincent's Birmingham's traditionally high patient satisfaction has remained high, the satisfaction surveys at St. Vincent's East indicate significant improvement. The staffs at both facilities are reportedly adjusting well.
As for the market share – the metric that served as the driving force behind St. Vincent's decision to become a system rather than a stand-alone hospital – how is this for synergy? In 2007, the summed market share for all the hospitals individually was 18.6%. After less than 3 years working together, their collective share is up by about 20%.
It appears that this is a "marriage" that has an excellent chance of working out. Where St. Vincent's really got this right was in laying the groundwork, having a clear mission in mind, and getting everyone on board.
Of course, in a pinch, it never hurts to have Sister Dinah on your side.
