By Emily J. Tipping.

Saint Vincent Health System CEO Sr. Catherine Manning

Published May 2001

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In 1998, Saint Vincent Health System and Hamot Health Foundation—friendly competitors in Erie’s healthcare market—were on the brink of a merger. The two organizations had spent millions of dollars and several years weighing the pros and cons of a consolidation, and decided it was well worth doing. Studies projected savings of more than $300 million over 10 years, money that could be plowed back into quality healthcare for the community. Slowly, physicians, residents and industry warmed to the idea of a single, strong tertiary care center in Erie.

But first, both health systems had to sign a consent decree drawn up by the state Attorney General’s Office. The document established goals for the hospitals as far as cost savings, staff cuts and reduction of inpatient beds. It also spelled out rules concerning health insurers, with a provision permitting insurers to request binding arbitration to settle pricing disputes with the hospitals.

Hamot remained eager to join forces. But after a months-long deliberation, Saint Vincent’s board of directors voted unanimously against consolidation, saying the financial risks of contract arbitration were too great.

Only two miles apart, Saint Vincent and Hamot now face a deepening divide. Encroaching competition from health care providers in Buffalo, Pittsburgh and Cleveland has forced the health systems to duplicate effort in lucrative services such as heart surgery and orthopedics. And although Saint Vincent and Hamot continue to jointly run a cancer center, blood bank, medical transport and other initiatives, Hamot’s recent decision to pull out of a trauma services joint venture has further soured the institutions’ relationship. It’s unclear what this ramped up competition will mean for Erie area physicians, many of whom claim staff privileges at both Hamot and Saint Vincent. But watchdog groups like Erie County’s Health Care Cost Summit worry that higher health care costs are inevitable.

"From our perspective, it was a missed opportunity when the two systems didn’t collaborate," said Summit director Peggy Popeski. "We would always promote collaboration because we feel it controls costs."

Traumatic Decisions

For nearly 15 years, Saint Vincent and Hamot have collaborated to provide regional trauma service through Tri-State Emergency Systems Inc. The trauma surgeons who work at Hamot and Saint Vincent on alternating days are employees of Tri-State, which also runs the ambulance service joint venture EmergyCare and the joint helicopter service LifeStar.

Hamot announced in February that it would remain a partner in EmergyCare and LifeStar, but would run its own round-the-clock trauma center beginning Sept. 1. A month later, Saint Vincent announced it would forgo head-to-head competition and drop its trauma service, but not before it waged a newspaper ad and mailing campaign attacking Hamot for its decision.

"When a hospital board and administration knowingly act to destroy a community asset, and, with indifference, drive up the costs of health care, we all should question their motives and practices," states the letter.

John Malone, president and CEO of Hamot Health Foundation, said Hamot was disappointed by the letter but did not publicly respond to it. The Tri-State board asked Malone to explain Hamot’s decision at a meeting. Saint Vincent’s chief executive officer, Sr. Catherine Manning, had spoken eloquently at the same meeting in favor of maintaining the shared service, which she felt had served the community well, said Malone.

"And I said that she answered the question for me," Malone noted. "Hamot is not satisfied with things being done adequately or reasonably well. People deserve better."

Jeffrey Bednarski, M.D., the director of Tri-State Trauma who will become trauma medical program director at Hamot in September, said physicians involved in trauma care in Erie have always wanted the service to be in one place.

Malone said that would have happened if Saint Vincent and Hamot had consolidated three years ago, as plans called for trauma to be run at one undetermined site. Splitting trauma service day-to-day between Saint Vincent and Hamot, he said, had been a "politically expedient" solution to an ambulance service problem. Now, the joint program is the only one of its kind in the country, "not because we are so far ahead of everyone else, but because the system is essentially flawed," said Malone. If a car accident victim is admitted to Hamot’s intensive care unit with a suspected lacerated liver on Hamot’s trauma day, he said, he could begin to bleed out the next day when the trauma surgeon and anesthesiologists are at Saint Vincent.

"It’s not how you should operate a trauma center. This [decision] is about us needing to do things extraordinarily well in order to be attractive from a cost, quality and outcomes perspective," said Malone, whose health system will renovate its emergency department, hire surgeons, intensivists and other staff, and spend about $1.5 million each year—nearly double what it contributes to the joint venture—on trauma service. "Hamot has been focused on moving forward and doing things right," he said.

Manning was unavailable for comment, but Richard Cogley, M.D., senior vice president of medical affairs for Saint Vincent Health System and new chairman of the Tri-State board, said Saint Vincent felt the community benefited from having two trauma-ready sites. The volume of trauma cases in the region, however, is not high enough to warrant two full-time trauma centers, he said.

"[Hamot] designed a strategic plan and full-time trauma was part of it," he said. "I feel that they felt they needed full-time trauma to stabilize their relationships with regional hospitals." Cogley would not elaborate on the letter Saint Vincent mailed out to patients and insurers, saying he was not intimately involved with the board action. Instead, he elaborated on Saint Vincent’s plans to move on from trauma and focus on its high-volume emergency services department, critical care—including cardiovascular services and orthopedic services such as fracture care and joint replacement, improved information technology, renovated labor and delivery suites and other projects.

Future Cooperation

Neither Cogley nor Malone counted additional joint ventures among their health systems’ future plans, for obvious reasons. But both administrators said they are confident that existing cooperative ventures will continue to work.

"Hamot and Saint Vincent have been in this situation since the beginning, competing," said Cogley. "That’s the unique thing about this area. We compete in clinical areas, but when it makes sense to come to the table together and avoid duplication, we do it."

In addition to EmergyCare and LifeStar, the two health systems share a stake in the Regional Cancer Center, Community Blood Bank, an occupational therapy program, and Regional Health Management Services, a billing company for employed physician practices.

Sr. Catherine Manning—and the Saint Vincent board, in its public letter—had in the past expressed concern that Hamot’s decision on trauma signaled the demise of other joint ventures. Malone said those fears are unfounded.

"Unless something materially dramatic happens, I can’t picture departing from them in the near future. If, for example, Saint Vincent were to align itself with someone who was competitive with Hamot, then we’d have to look at them," he said.

Bednarski acknowledged the success of EmergyCare and LifeStar.

"Trauma was directly subsidized by both hospitals. EmergyCare is self-sufficient and the helicopter transport was subsidized but will soon be self-sustaining, as well. So there’s no reason why they should be dissolved," he said.

Physician/Community Impact

Despite past success at maintaining extraordinary collaboration while still competing, it appears as though Hamot and Saint Vincent are headed down different roads. James Pepicello, M.D., Hamot’s senior vice president of surgical services, said Hamot’s decision to start full-time trauma was not meant to be a battle, as the local media characterized it.

"It goes beyond trauma," he said. "We’re taking things up a couple of notches. I’m not ignoring the business aspects of this—you need to offer high quality care at an affordable price." Cogley said that he doesn’t expect competition—since it has always existed—to change the day-to-day work of Erie physicians. But some physicians say there is already a palpable change in their work environment.

"The feeling I get around town is that PCPs are not happy. Every doctor in town is worried about the back stabbing between the two," said Richard Long, M.D., a cardiothoracic surgeon with Flagship Cardiac Vascular Thoracic Surgery (CVTS), a heart practice based at Hamot. "It’s not a good atmosphere to work in, especially since many doctors work at both hospitals. And PCPs don’t want to see one hospital get weaker than the other."

Long was one of a group of five heart surgeons affiliated with Saint Vincent who relocated to Flagship CVTS last year. He would not elaborate on that decision, but said the group continues to perform surgeries at both hospitals.

Saint Vincent has since hired two new cardiovascular surgeons and will soon have a third, said Cogley. Long and the other members of Cardiopulmonary and Peripheral Vascular Associates were not forced to leave, said Cogley.

"Cardiologists here felt the community would benefit from the addition of cardiovascular surgeons skilled in newer techniques, operating on patients who normally would be referred to larger centers in Buffalo, Cleveland or Pittsburgh," he said.

Aggressive competition from those cities is "a very real thought on everyone’s mind," said Long, who feels a consolidation would have strengthened Saint Vincent and Hamot’s presence in the expanding market. Down the road, he said increased competition will hurt the whole community, physicians and patients, because of the amount of money that will be spent on advertising instead of on patient care. "The mudslinging back and forth doesn’t help public perceptions," said Long.