CAPE HOSPITALS MAY AFFILIATE; ST. FRANCIS, SOUTHEAST STUDY ISSUE

Health care in Cape Girardeau and the surrounding region could be a new ballgame in six months to two years.

Health and business leaders are awaiting the outcome of a joint study on the feasibility of a "permanent affiliation" between Southeast Missouri Hospital and St. Francis Medical Center.

Officials from both hospitals announced the decision at a press conference Friday.

Exactly what that affiliation might mean is under study.

James Sexton, president of St. Francis Medical Center, said it will not mean closing either hospital. The potential patient load is too great for either facility to handle on its own, Sexton said.

What it probably will mean is "some level of common governance" between Southeast and St. Francis, said Sexton.

"There are a number of different options" that could come into play in the administrations of the two hospitals, Sexton said.

No one is saying that the two hospitals will merge.

"We're using the term affiliation because it offers a broader menu of options," Sexton said. "Merger is pretty straightforward and clear, and that's an option."

It also could mean developing a joint administration or board, he said.

"There's just a number of different options available," Sexton said.

Officials at both hospitals say their goal is to increase efficiency and service, reduce duplication of services and cut costs through affiliation while maintaining local control of the health-care industry, strengthening the hospitals' regional presence and assuring a broad range of health-care services.

A Joint Study Committee made up of representatives from both hospitals will study the impact an affiliation will have -- including potential cost savings, job cuts and specialized health-care services, said Sexton and James Wente, Southeast's administrator.

Harry Rediger, chairman of the St. Francis Medical Center Board of Directors and a member of the Joint Study Committee, said at Friday's press conference that the two hospitals have agreed to "once again enter into the joint discussion process."

Southeast and St. Francis began negotiations in 1988, but the talks were dropped "after months of work and substantial financial outlay" because of concerns over federal antitrust laws, Rediger said.

"In the past nine years, health care has undergone a metamorphosis, perhaps more than any other industry," Rediger said, pointing to hospital mergers and networking around the country, the growth of managed care and the expansion of outpatient medical care.

"Antitrust agencies today are taking those competitive realities into account and looking into the efficiencies these systems can achieve," Rediger said.

Wente said the Department of Justice has been notified of the negotiations. Both hospitals have retained private and joint legal counsel on antitrust issues.

Rob Erlbacher, president of the Southeast Board of Trustees, said an affiliation will help achieve three goals: improve local competition with regional markets such as St. Louis and Memphis, improve prices, and increase the number of managed care contracts.

Wente said the study committee could complete an economic analysis and "have our governance structure" in place by the end of the first quarter of 1998.

The entire process of the affiliation could be completed by July or August, "absent any governmental interference," Wente said.

Wente said he expects the Federal Trade Commission or U.S. Justice Department to take some interest in the process.

"The target could be a window, if you will, of six to 24 months," he said.

There is a possibility of layoffs if the affiliation becomes reality, Wente said. He said administrators hope attrition would account for the majority of jobs eliminated.

The study committee will visit Clinton, Iowa, and Owensboro, Ky., two communities where similar affiliations have been achieved between Catholic and secular community hospitals, Rediger said.

Sexton said the archdiocese has been informed of the discussions and is supportive of the process.

Leaders of Cape Girardeau's medical and business communities say they support the joint talks.

John Mehner, president of the Cape Girardeau Chamber of Commerce, said the chamber's board of directors had no reaction to Friday's announcement. "We've always been interested in collaboration between the two institutions," Mehner said.

Dr. Richard Martin, president of the Cape Girardeau County Area Medical Society, said: "We're just all very pleased to see the two hospitals working together. We feel that a duplication of services has always been recognized as a depletion of resources. When we can define the market, so to speak, or the needs of the people of Southeast Missouri, and help to more efficiently and effectively treat those illnesses and problems, I think we'll all be better off."

The issue of local control is an important one for practitioners, Martin said, and an affiliation between the two hospitals will help preserve that and lessen the chance of an out-of-town organization taking over one or both hospitals.

"We have an opportunity to be pro-active and participate and be competitive with other places, quote, outside our area, without that threat," he said. "If we hang together we're less likely to hang separately."

Judy Thrower, president of the SEMO Business Group on Health's Board of Directors, said her organization is "very supportive" of the discussions and is awaiting the outcome.

The group's goal is quality health care at reasonable cost, Thrower said.

"Some type of affiliation could help achieve that goal by the two hospital systems becoming more efficient."

Southeast has engaged Shughart, Thompson and Kilroy of Kansas City as consultants for the affiliation process. St. Francis has engaged Gardner, Carton and Douglas of Chicago for the process.

HOSPITAL FACTS

St. Francis Medical Center

264 beds

1,300 employees

$120 million in assets

Medical center: 338,000 square feet

Medical office building: 98,315 square feet

Southeast Missouri Hospital

281 beds

1,500 employees

$120 million in assets

Medical center: 350,000 square feet