Mayo Regional Hospital officials say Northern Light merger is crucial for survival

DOVER-FOXFCROFT — Leaders of Mayo Regional Hospital say the merger they’re pursuing with one of the state’s largest hospital systems is critical for the Dover-Foxcroft facility’s survival after years of operating losses.

But the negotiated merger agreement with Northern Light Health would only obligate the hospital system to keep operating Mayo in its current form for five years after the merger.

At that time, according to the agreement, Northern Light could choose to end any of the hospital’s core services after holding a “nonbinding consultation” with Mayo’s board of directors.

That’s one of many conditions laid out in the 161-page merger agreement that Mayo’s publicly elected board approved last month in a 15-3 vote and that Northern Light’s board plans to consider March 20.

Once approved by Northern Light but before the merger is complete, the agreement would place a number of other restrictions on Mayo, such as limits on how much money it can lose and contracts it can enter into or terminate.

Officials from both organizations say they intend to keep operating Mayo beyond that five-year mark and that the merger will make it more likely that the 25-bed hospital’s doors can stay open.

Marie Vienneau, the hospital’s president and CEO, said it is possible services could eventually change or be reduced regardless of whether the merger happens but that the most important goal is the continued operation of a health care facility in rural Piscataquis County.

Mayo Regional Hospital President and CEO Marie Vienneau

“The board feels it’s in the public interest to maintain a community hospital with high-quality health care, and they’ve already determined they don’t think they can do that as a free-standing entity,” she said. “None of us believes all of our services are going to look exactly like they do in 10 years, and I don’t. With the rate of closures of small rural hospitals, we are going to be grateful to maintain access to local, high-quality health care. That’s what we believe our merger with Northern Light will do.”

There are several reasons that joining the larger system will help Mayo stay afloat, Vienneau said, such as the ability to offload costly administrative work onto the parent organization or easily share health care providers from other facilities in the system.

Northern Light, which is based in Brewer and used to be called Eastern Maine Healthcare Systems, runs nine hospitals stretching from Presque Isle to Portland, including Northern Light Eastern Maine Medical Center in Bangor and one other in Piscataquis County: Northern Light CA Dean Hospital in Greenville

That size could help Mayo in other ways, according to Vienneau. She said the organization probably has greater leverage than Mayo in its negotiations with vendors and health insurance companies. Given the leverage with insurance companies, the new affiliation could secure the Piscataquis County hospital higher prices for the care it delivers.

What’s more, both Vienneau and a spokesman for Northern Light Health said that if the merger happened, Mayo might be able to accept some patients from around Piscataquis County who would normally be referred to Northern Light Eastern Maine Medical Center in Bangor for care. That new stream of patients could bring in additional revenue, according to Vienneau.

“You don’t need to move very many surgery cases a year to make a big difference in revenues,” she said. “Twenty-five cases is a big difference for a small place.”

The hospital has suffered operating losses every year since 2010 because of a mix of factors, Vienneau said. They include low patient volumes, the challenges of attracting full-time physicians, the need to hire temporary physicians at three times the cost of full-time staff, reduced Medicare and MaineCare reimbursements for some services and financial pressures such as Maine’s increased minimum wage.

Mayo isn’t alone in navigating those troubled waters. Vienneau referred to an analysis last month from the consulting firm Navigant that found eight of Maine’s 20 rural hospitals are at high financial risk.

Mayo’s leadership has been considering an affiliation with a larger organization for at least a decade.

Around the start of 2016, administrators reached out to four different health care organizations to gauge their interest: what’s now Northern Light; Covenant Health, the parent organization of St. Joseph Hospital in Bangor; Portland-based MaineHealth; and Lewiston-based Central Maine Health Care.

Only Northern Light and Covenant made proposals. In July 2016, Mayo’s board voted to sign a letter of intent with Northern Light.

Nancy Kane, a professor of management at the Harvard T.H. Chan School of Public Health who has previously consulted with health care agencies in Maine, said it’s possible for the merger of a small hospital like Mayo and a larger system like Northern Light to yield positive outcomes.

But a merger can also bring threats, including a loss of local control and the prospect of the new parent organization either changing services or closing the hospital, according to Kane.

While it may be difficult for hospitals like Mayo to stay independent, the new parent organization could shift local offerings away from acute care toward outpatient or long-term care, Kane said. That, in turn, could lead to a backlash from people who live near the hospital and don’t want to see services cut.

“It may be in the long run the right thing to do, but then someone in Bangor is deciding what to do in Dover-Foxcroft,” Kane said.

Under the merger, the hospital would be converted to a nonprofit organization with its own locally appointed board. Currently, a public board with elected members from 13 towns oversees the hospital.

For five years after the merger is completed, the newly formed board would be able to reverse — or “unwind” — the merger if it determines that Northern Light stopped offering any core clinical services without the group’s consent, according to the merger agreement.

But after five years, Northern Light would no longer need the board’s approval to end core services, according to the agreement. Instead, it would only have to hold “a nonbinding consultation” with the board.

Chris Facchini, a spokesman for Northern Light, said the organization’s goal is to keep offering “quality care” in Piscataquis County if the merger goes forward.

“We have no intention of closing the hospital and would not be pursuing this agreement if we desired to see the hospital closed in five years,” Facchini said in an email. “Our mission is to provide quality care close to home, and our track record speaks for the strategic importance of our community hospitals. As we stated earlier, Mayo is strategically located to allow us to free up capacity at Northern Light Eastern Maine Medical Center for procedures that can be done at Mayo.”

Even before a merger takes effect, the merger agreement contains a number of restrictions on Mayo’s operations.

The hospital, for example, will have to keep its operating loss in any month below a level that would work out to $1.8 million annually. In the first four months of this fiscal year, Vienneau said, Mayo ran about $1.5 million in operating losses due in part to the steep costs of a recent conversion to a new information technology system. But she said the hospital should be able to stay within the $1.8 million limit.

The merger agreement also prohibits Mayo, in the period before the merger takes effect, from losing more than 10 percent of its physicians. During that period, the hospital also must seek Northern Light’s approval before making a variety of changes, such as changing its charter, or ending or entering into any contracts worth more than $100,000.

It also says that representatives of Mayo, including its publicly elected board members, should make “good faith efforts” to support the passage of state legislation that’s required for the merger, as negotiated, to go forward. Those representatives should not “take any actions contrary to the foregoing commitments,” the agreement reads.

The legislation required by the merger agreement would eliminate Mayo’s current charter from the 1970s and, in the process, remove the ability of residents in the hospital’s 13 member communities to vote on the merger.

The legislation would dissolve the quasi-municipal entity, Hospital Administrative District No. 4, that now owns and oversees Mayo.

So far, no area legislators have publicly committed to sponsoring such a bill. But Vienneau said hospital leaders have had “fruitful conversations” with the local delegation, though she couldn’t comment on when or whether the legislation will be filed.

Mayo officials plan to hold four public forums about the merger next month, each happening from 5:30 to 7:30 p.m. They are scheduled for April 1 at the Ridge View Community School cafeteria in Dexter; April 2 at the Morton Avenue Municipal Building gym in Dover-Foxcroft; April 9 at Guilford United Methodist Church; and April 18 at the Penquis Valley School gym in Milo.

Local officials from seven of the district’s member towns have written letters supporting the merger. Those towns are Abbot, Atkinson, Bradford, Dexter, Dover-Foxcroft, Guilford and Milo. The other towns in Hospital Administrative District No. 4 are Cambridge, Monson, Parkman, Sangerville, Sebec and Willimantic.

The merger also would require approval from state regulators.