Case study
Kiss Her Goodbye

The Penn State - Geisinger Healthcare Merger

By Michael Raphael
Associated Press
June, 1997

LAMAR -- Eighty-five years ago, a wealthy widow named Abigail A. Geisinger ordered a new, grand hospital to be built in the rural backwoods of central Pennsylvania.

"Make my hospital right; make it the best," Mrs. Geisinger demanded.

And it was. So successful was her hospital that by 1921, just six years after it opened, administrators were forced to expand the Danville facility.

The years since were no different. One year the nursing school grew. Another year it was the outpatient clinic. As the center part of the state grew, so did Geisinger.

On Tuesday, Mrs. Geisinger's legacy will get even bigger. Pending approval from the state Attorney General's office, the Geisinger Medical Center will merge with Penn State's prestigious Milton S. Hershey Medical Center to create a massive new health care conglomerate.

The new entity, to be known as the Penn State Geisinger Health System, will span 40 counties and include more than 1,000 doctors -- one for every five physicians in the area. The system will operate four hospitals and be affiliated with dozens more.

Only the health giants in Philadelphia and Pittsburgh will compare.

Officials call the pairing a critical move in the fast-changing world of American health care. Higher profits mean increased security, they say. What else could have brought together the two health care giants?

The potential effect on patients is unclear, although one expert did not expect them to see a big change.

"It's hard to predict," said Dr. Alan Hillman, director of the Center for Health Policy at the University of Pennsylvania. "Both have been efficient, good citizens so far and one would hope that that's not going to dissipate simply because they have a bigger corporation.

"I don't think there's going to be one (bit) of difference to the actual patients." Access may increase

Certain aspects of patient care may in fact even improve, Hillman said. "Although they were both very big, the theory goes the bigger the better," he said. With $1 billion in annual revenue projected, the local patient could gain increased access to new equipment and medical techniques.

The leadership of the new system has promised no layoffs -- "The only difference will be the sign," said Dr. Bruce Hamory, the chief operating officer at Hershey -- although executives have not yet specified exactly where a projected $105 million in savings will come over the next three years.

One labor group, the registered nurses at Hershey, has already protested cutbacks in benefits with a picket last Sunday at the medical center. Union organizers have voiced concern about the potential impact on patient care, and a group of Geisinger physicians also have expressed concerns about the future.

The biggest impact of the merger, however, may be felt by small competitors, experts said. Competition difficult

The two groups rarely butted heads, Geisinger concentrating to the north of Hershey, but further expansion by either health care powerhouse would have increased competition. That usually leads to lower prices and more services, experts said. Now, smaller affiliations will have the daunting challenge of taking on a "behemoth," in Hillman's words.

Others agreed.

"I would be concerned that it might be very difficult for competitors ... to enter and really compete," said Martin Gaynor, professor of economics and health policy at Carnegie Mellon University.

"I'd be lying to say we weren't thinking about it," said John McQueary, administrator for Internal Medicine Associates of State College. The physician group, currently a competitor of Geisinger's managed care system, had close to 50,000 office visits last year.

Now Internal Medicine Associates is talking with officials from Penn State Geisinger about a possible affiliation.

"To me if we can cut a reasonable deal and work with Geisinger, that's certainly in their interest and with ours," McQueary said.

As for the single practitioner or small group practices, McQueary's outlook is not nearly as rosy. "I'm concerned. I think they (are) fastly disappearing," he said. "And this merger, it's certainly not going to help them." Size downplayed

Hamory, the Hershey executive, downplayed the size of the new system and pointed out the thousands of doctors at dozens of other hospitals in the area that will serve as healthy competition for Penn State Geisinger.

"With the rapidly changing face of health care, all hospitals are under increasing cost pressure," he said. "By having a strong, more profitable system, it offers both a better chance at survival ... and an increased community benefit."

Indeed, much of impetus for the merger, according to one health care consultant who asked not to be identified because he works with Geisinger and Hershey, was to make it more difficult for health care colossuses like Allegheny to bid for the systems.

"It's an effort by the two organizations to broaden their bases and gain more patients, and possibly to protect theirselves from additional providers who are expanding," the consultant said.

Ultimately, the success or failure of the merger may show itself in the happiness of the patients themselves.

At the Geisinger Medical Group building here in rural Clinton County few had heard of the merger. Those who had mostly hoped that things would stay as they were: pretty good.

"I like my doctor so I'll keep coming," said Tara Remick, 24, as she stood with her 5-week-old baby, Garrett. "There's not really much else to choose from anyway."

And all Linda Davy, 40, of Orviston, asked for was that her doctor continue to kiss her goodbye when she leaves.

"We're treated like people here," she said as an Amish buggy clip-clopped in the distance. "We don't want to be treated like a number."


1. What post-merger integration steps are needed to make these two hospital groups work together successfully?
2. What could go wrong, and why? | | | | contact
Copyright ©2005 Ian Giddy. All rights reserved.