A HEALTHY COMPETITION

The recently announced merger between the Harvard-affiliated Mount Auburn, Beth Israel and Deaconess Hospitals will create a new competition between two conglomerates of five Harvard-affiliated hospitals.

Beth Israel and Deaconess Hospitals announced plans to merge three weeks ago; and on Monday, Mount Auburn Hospital announced it would join them.

The new network, yet to be named, will compete for patients with Partners HealthCare System Inc., the conglomerate formed in 1993 from Mass. General and Brigham and Women's Hospitals.

"I think any of the entities that are able to grow in size will be in a better position to compete," says Bryan Costantino, health care consultant at the Boston accounting firm of Coopers and Lybrand.

Partners HealthCare, with $1.8 billion in total revenue, is nearly twice as large as the new network, but Beth Israel and Deaconess have announced they will add more community hospitals to their network.

The proposed merger between Mount Auburn, Beth Israel and Deaconess would combine their resources into a single corporation with more than $1 billion in revenue, 9,000 employees and 1,800 physicians.

Background

Dean of the Medical School Daniel C. Tosteson '46 tried in the summer of 1993 to develop a closer collaboration between the Medical School and its five major teaching hospitals, Mass. General, Brigham and Women's, Beth Israel, Deaconess and Children's Hospitals, which had been fiercely independent and competitive.

But those plans erupted in December of 1993, when Mass. General and Brigham and Women's announced their merger, bypassing Tosteson and the Medical School.

The merger was organized behind closed doors by then-Business School Dean John H. McArthur, the chair of Brigham and Women's Hospital.

In the fall of 1994, Children's Hospital discussed a possible merger with Partners HealthCare, but those talks fell through.

Other merger discussions involving Beth Israel and Deaconess Hospitals have fallen through recently.

Beth Israel conducted unsuccessful merger talks with the Lahey Clinic last year, while a deal between Deaconess and New England Medical Center, a Tufts teaching hospital, also fell through.

But some say rising costs in the health care industry make mergers necessary for survival.

"I think this is the direction the market [is] heading in terms of hospitals getting larger in order to compete," Costantino says.

New Network

Hospital officials say they are positive that the merger between Deaconess, Beth Israel and Mount Auburn will succeed because it will create greater economic efficiency.

"It will position Mount Auburn, its physicians and Beth Israel-Deanconess...to enhance quality, service and fiscal efficiency in the highly competitive marketplace of managed care," Francis P. Lynch, president of Mount Auburn Hospital, said in a press release.

Representatives from Partners HealthCare say they are not surprised by the merger announcements.

Bringing together the resources of the hospitals will make it "easier to navigate through the system," says Carolyn Castel, director of corporate communications for Partners HealthCare.

"It doesn't pose something that's tremendously new, nor was it in any way unexpected," says Castel. "We didn't see it as a surprise move."

The joining of Beth Israel and Deaconess will involve a physical combination of the two Longwood area hospitals. The buildings, which are across the street from one another, will be joined and the staff will be brought together under a common system.

Though Mount Auburn will not become a physical entity of the merger, it will merge its resources with Beth Israel and Deanconess to allow for mass ordering of supplies and a joint-negotiation of insurance contracts which would lessen costs, according to Erin C. Martin, spokesperson for Deanconess Hospital.

Douglas M. Pravda contributed to the reporting of this story.

PATHWAY HEALTH NETWORK

The parent company of Deaconess Hospital

ANNUAL REVENUE: $479.6 MILLION

BEDS: 951

EMPLOYEES: 4,560

PHYSICIANS: 700

MOUNT AUBURN HOSPITAL

ANNUAL REVENUE: $120 MILLION

BEDS: 300

EMPLOYEES: 1,430

PHYSICIANS: 613

PARTNERS HEALTHCARE

The merger of Mass. General and Brigham and Women's Hospitals

ANNUAL REVENUE: $1.8 BILLION

BEDS: 2,100

EMPLOYEES: 12,000

PHYSICIANS: 4,000

BETH ISRAEL HEALTHCARE

ANNUAL REVENUE: $436.1 MILLION

BEDS: 408

EMPLOYEES: 3,100

PHYSICIANS: 557