Harvard-Affiliated Hospitals Complete Merger

The parent companies of Harvard-affiliated Beth Israel, Deaconess and Mount Auburn hospitals announced the finalization of their merger yesterday.

Daniel C. Tosteson '44, dean of the Medical School, said in a statement that "the rapidly changing pattern of reimbursement for clinical services" was a major reason for the merger.

The merger brings together seven teaching and community hospitals, 9,000 employees, 1,700 medical staff, $1.1 billion in revenue and $1.6 billion in total assets to form CareGroup, Inc. It will be one of the largest health-care networks in the Northeast.

"The formation of CareGroup will improve the capacity of the three merging institutions to cope with the new economics of the delivery of clinical services," Tosteson said.

CareGroup will also provide competition for the Harvard-affiliated Partners HealthCare System Inc., the $1.8 billion conglomerate formed when Massachusetts General Hospital and Brigham and Women's Hospital merged in 1993.

The hospitals involved in the CareGroup merger agreed in principle last March to merge, but did not finalize plans until yesterday.

"Talks for the merger have been going on for awhile, but the first step was taken this past April when a memorandum of understanding was signed that outlined the steps of the merger," said Erin C. Martin, media relations manager of Deaconess.

CareGroup, which is also the parent company of New England Baptist Hospital, will have a single administration and board of directors. Decision-making authority will be shared among the various hospitals, physicians and physician groups.

"Services will definitely be enhanced," Martin said. "Each hospital will continue to serve their community, but now, by teaming up, community hospitals will have access to the resources of teaching hospitals."

The merger will also benefit faculty members at the Medical School, where subsidies for research have suffered recently from decreased managed care payments and from a growing trend towards outpatient care.

"The merger will create many more opportunities for collaborations in innovations in medical education as well as innovations in research," said Don L. Gibbons, director of public affairs at Harvard Medical School.

While there are no immediate plans for layoffs at any of the hospitals, Martin said that in the future the hospitals "will have to look to see how to run most efficiently."

"There's a lot of work that still needs to be done to bring the hospitals together," he added

The merger will also benefit faculty members at the Medical School, where subsidies for research have suffered recently from decreased managed care payments and from a growing trend towards outpatient care.

"The merger will create many more opportunities for collaborations in innovations in medical education as well as innovations in research," said Don L. Gibbons, director of public affairs at Harvard Medical School.

While there are no immediate plans for layoffs at any of the hospitals, Martin said that in the future the hospitals "will have to look to see how to run most efficiently."

"There's a lot of work that still needs to be done to bring the hospitals together," he added