OWENSBORO, KY., MERGER A SUCCESS

Two years ago the hospitals in Owensboro, Ky., pooled their resources in order to compete against the "big guys."

Medical centers in nearby Louisville, Ky., Nashville, Tenn., and Evansville, Ind., were enticing patients away from Owensboro's two hospitals.

Fears existed that large, national health-care operations would come in and further erode the local medical establishment.

So Mercy Hospital and Owensboro-Davies County Hospital combined forces to become more competitive. The new Owensboro Mercy Health System, formed in 1995, has proven a success.

In two years since the merger, Owensboro Mercy has:

-- Reduced patient charges four times.

-- Increased charity care 33 percent.

-- Returned to the community $39 million in charges.

-- Saved $20 million in actual costs.

-- Recruited 23 new medical specialists.

Buzz Norris, Daviess County judge executive, helped author the merger agreement and has served on the hospital board since 1990.

"Everything we said we could do we have surpassed," he said.

The hospital has 425 beds.

"I know it's unbelievable, but some days we are full, and days with 80 to 90 percent occupancy happen regularly," Norris said. Before the merger both hospitals were about half full on the best days.

Since the merger, the hospital emergency room has become the busiest in the state. The hospital is looking at drawings for an emergency room expansion.

The Mercy Hospital building, which was about 50 years old, was razed. In its place a health park is planned.

The merger made Owensboro Mercy Health System into a regional hospital. "We are able to partner with Vanderbilt University," Norris said. "Anything they are doing in cancer care, we are doing."

Business in cancer care increased fourfold.

Greg Carlson, chief operating officer of Owensboro Mercy Health System, said that when the two hospitals began merger talks many people were skeptical.

"People said mergers are long on promises and short on actual performance," Carlson said. "They said mergers don't save money."

But Owensboro Mercy bucked the trend.

Key to Owensboro's cost savings was quick action, Carlson said.

After the merger was finalized in 1995, the two hospitals quickly consolidated their operations. "We didn't maintain two of everything," said Carlson.

In addition, Carlson said, cultures of the two hospitals were integrated. The two entities were quite different.

Mercy Hospital was a small, Catholic hospital; Owensboro-Daviess County Hospital was a larger, publicly-owned hospital. The larger hospital was integrated into the smaller one.

At first the integration was tough for employees. "But we did a survey 20 months later, and the improvements were phenomenal in the commitment of our employees to the hospital," Carlson said.

Norris said Owensboro realistically had no choice but to merge the hospitals. The city has a population of 52,000. Daviess County population tops 90,000.

"Study the numbers: When a city gets to be 50,000 population, it can't possibly support two hospitals," Norris said. "The duplication of costs is just too expensive."

The two local hospitals were focusing their efforts on each other rather than the real competitors in other cities, Norris said.

"We looked around the country and saw what was happening," he said. "We saw hospitals going out of business simply because of local competition. Now we don't have local competition.

"We have healthy competition, but it's with Nashville, Louisville and Evansville. We are no longer competing against ourselves," Norris said.

He said patients in need of specialized care stay in Owensboro instead of seeking treatment in other communities.

Fred Reeves, executive vice president of the Owensboro-Daviess County Chamber of Commerce, said the merger has proven beneficial to the whole community. Directors were smart in their approach to the merger and their actions after it was finalized.

"They made the case that this was necessary financially," Reeves said.

Then Owensboro Mercy Health System leaders reached out to be a true regional center and built provider networks in about a 150-mile radius.

The hospital is highly focused on wellness for the community. In addition, it has pumped money back into the community through charitable endeavors.

From Reeves' perspective, one of the smartest moves the hospital made was partnering with the chamber to put together an HMO and health insurance package that resulted in savings to local businesses.

Said Reeves: "From my perspective this has absolutely been good for the community. We don't have to travel to Louisville and Nashville for health care. And we have a much higher degree of confidence in the care we get here."

"They still have their critics and the non-believers," Reeves said.

Some express concern that the governing board of the new private entity isn't open to the same scrutiny as the hospital that was owned by the city and county.

But the main concern remains competition.

"When you start doing HMOs and networks, you do restrict competition," Reeves said. "But if we contain costs and do it responsibly, things work."

Reeves said neither of the two hospitals could have competed alone against "the big guys."

"There are the Columbias and Humanas who might come in and take control. If we had Columbia HCA, it would be owned like a Wal-Mart.

"With the merger, we still have a great deal of local control," he said. "And that was one very important issue to us."