MERGER MAY BE IN WORKS

A full-fledged merger could be the end result as Cape Girardeau's two hospitals continue exploring a permanent affiliation.

St. Francis Medical Center and Southeast Missouri Hospital announced Thursday that both their boards have signed a non-binding memorandum of understanding to continue the affiliation process.

Now the Joint Study Commission, made up of board members and administrators from both hospitals, has to work out the details of how that affiliation will take place, and what form it will take.

Jim Wente, Southeast's administrator, said both hospitals' boards seem to be "contemplating what would be called in the business world a merger, a combining of the two hospitals into one."

If the boards continue on that course and the affiliation goes through, the "full-asset combination" would result in the two hospitals becoming a single corporate entity, Wente said.

Neither of the existing buildings will be closed, said James Sexton, president and CEO of St. Francis.

It is "premature" to discuss how services offered at each institution might be affected, or whether health care services would be added or cut from either facility, Sexton said.

But Wente did say, "We would be one. We have to think of it in terms of one institution."

The final decision to affiliate has not yet been made, Wente and Sexton said.

The decision to continue the process "takes us to a point where we need to get all of the information on the table before the final decision to affiliate is made," Sexton said.

"Until (the boards) make the decision to go forward, we're not," Wente said. "We're just proceeding with giving the board the final pieces of information they need."

The two hospitals' boards will undertake three tasks as the affiliation process continues, Sexton said.

First, both hospitals will enter into a due diligence process, and begin studying each other's financial status and other previously confidential financial information.

The boards also will have to develop a master affiliation agreement that will spell out the details of the process, and officially notify the U.S. Department of Justice of their intent to affiliate.

Hospital officials anticipate filing the affiliation documents with the federal government within the next 30 days.

"If we can make it, our goal is to have it done by the first of September," Wente said.

Wente said the Justice Department has been "informally notified" of the possibility of the affiliation, and he understands the agency has made "informal inquiries" into the process.

John Mehner, executive director of the Cape Girardeau Chamber of Commerce, said the chamber and the business community support the cooperative spirit between the two hospitals.

"The chamber and many people in the business community have said that the hospitals need to talk about working together, rather than separately," Mehner said.

But until the details of any affiliation are known, he said, it is hard to comment on Thursday's announcement.

"The details are the key," Mehner said.

The Arthur Andersen and Co. consulting firm carried out an efficiency study that concluded an affiliation between the two hospitals could save $47 million over five years.

The savings would be realized through increased operating efficiencies, reduced capital expenditures and reduction of some personnel.

Wente said the study indicated "some consolidation that would result in a smaller work force. But by the same token, we're looking at regionalizing even further, and that could mean expansion."

Most of the job losses would probably come through attrition, he said.

Wente and Sexton say the affiliation is needed to help control health care costs in the region by eliminating duplication of costs, and to help maintain local control of health care services and ensure the availability of tertiary health care in the region.

If the hospitals continue operating independently, they argue, either could be bought out by an out-of-town health care system.

Affiliating the two hospitals also would allow for better competition within the region, they argue.