Laying claim to one of the state’s largest remaining independent hospitals, Boston’s Beth Israel Deaconess Medical Center said Thursday it signed a letter of intent to acquire Jordan Health Systems Inc., the parent of 155-bed Jordan Hospital in Plymouth.
Jordan Hospital, serving a dozen communities in Plymouth and Barnstable counties, had been considered a prize for a larger hospital system as the Massachusetts health care industry consolidates. The preliminary deal with Harvard-affiliated Beth Israel Deaconess is a setback to Tufts Medical Center, another Boston teaching hospital that has a clinical affiliation with Jordan and was working with for-profit Vanguard Health Systems to take over the Plymouth hospital.
“We’re running out of hospitals,” said Ruselle W. Robinson, health care attorney for Boston law firm Posternak Blankstein & Lund. He said many community hospitals already have joined with so-called accountable care organizations, emerging networks of health care providers that are banding together to coordinate care and negotiate better insurance contracts.
Beth Israel Deaconess and Jordan Health said financial terms of their alliance still have to be worked out, but under their letter of intent the Boston academic medical center would become the “sole corporate member” of Jordan. That’s similar to the relationships Beth Israel Deaconess has with satellite hospitals in Milton and Needham, both of which it acquired in the past decade.
“Jordan is a high-quality community health care partner,” said Kevin Tabb, chief executive of Beth Israel Deaconess. “Key to our strategy is to grow as a network so we can provide care not only in Longwood but out in the community... I don’t think this is the end of our growth.”
The parties hope to sign a definitive merger agreement later this year after a due diligence process is completed. Jordan expects to retain its local management and board as well as its nonprofit status. But it hasn’t been decided whether the 110-year-old Plymouth hospital will take the name of Beth Israel Deaconess, as the Needham and Milton hospitals have done, or what kind of financial investment Beth Israel Deaconess would make in Jordan.
Peter Holden, president of Jordan Health Systems, said the board recognized about a year ago that it needed to align itself with a financially stronger partner. “We just said we’re not big enough to be able to take the health care of the population and be at risk for it and have the resources to get there with the transformation of health care,” Holden said. “We wanted to make sure there was a vibrant health care system in Plymouth for generations to come.”
Jordan hired Chicago health care consulting firm Kaufman Hall to help it review four bids for the hospital, Holden said, but he said officials also talked to other parties that didn’t submit bids. “Everybody in Boston talks to everybody,” he said.
Holden said teaming up with a nonprofit hospital system “was not a requirement but it was a definite plus.”
Despite posting a $4.1 million profit in its 2011 fiscal year, Jordan has been shedding jobs in response to declining health care reimbursements. The hospital eliminated about 75 management and hourly positions last year, leaving it with about 1,500 employees. It has 250 doctors on staff and about 200 affiliated physicians. A private developer is building a 30,000-square-foot medical office building near the hospital, but Jordan is not financing the project.
Beth Israel Deaconess, which earned $62.2 million in 2011 at its main hospital in Boston’s Longwood Medical Area, has been slowly building up its network to better compete with the larger Partners Healthcare System and Steward Health Care System in eastern Massachusetts. Earlier this month, Beth Israel Deaconess said it was launching a new kind of accountable care organization that would include not only employed and affiliated doctors but also independent community doctors and hospitals it doesn’t wholly own.
If the Jordan deal goes through, it would further fill out the Beth Israel Deaconess network, which includes its own physicians group as well as Atrius Health, a Newton-based chain of doctors groups such as Harvard Vanguard Medical Associates. Beth Israel Deaconess also has a clinical affiliation with Hebrew SeniorLife and is negotiating affiliations with Cambridge Health Alliance and Signature Healthcare in Brockton, which operates the 253-bed Brockton Hospital.
Expanding its network will help Beth Israel Deaconess obtain more favorable terms in bargaining with health insurers, which are increasingly demanding hospitals take on financial risk by accepting fixed payments for a patient’s care rather than billing for each visit and procedure. Jordan and the other providers in its network would share in that benefit.
“Jordan is a relatively strong community hospital,” said health care lawyer Robinson. “But the whole payment system is in flux and networks will have more leverage than community hospitals... Beth Israel Deaconess is formidable. They’re not as strong as Partners. And they don’t have as many hospitals as Steward, but Steward is a community hospital system.”
It remains unclear how the Beth Israel Deaconess alliance with Jordan will affect the Plymouth hospital’s clinical affiliation with Tufts Medical Center. Holden said the Tufts relationship will continue for the foreseeable future.
“We’re not severing ties with Tufts,” he said. “What form that will take in the future Tufts, Beth Israel Deaconess, and Jordan will determine.”
Tufts vice president Brooke Tyson Hynes said patients referred from Jordan make up only about 2 percent of the Chinatown hospital’s volume. “We had a great affiliation with Jordan,” she said. “Would we have liked to work more closely with them? Sure. But you know this market. No one wins them all. We’ve certainly had our share of wins in contests with the BI.”
Among those gains, she cited MetroWest Medical Center, which runs hospitals in Framingham and Natick and switched its clinical affiliation from Beth Israel Deaconess to Tufts in 2009.
While it will not be a financial partner in the Jordan deal, Beth Israel Deaconess affiliate Atrius took part in the negotiations and expects to expand its role in the Plymouth area if the deal is finalized. Atrius owns the South Shore Medical Center, with about 80 doctors at offices in Weymouth, Norwell, and Kingston, and it has nearly 50,000 patients living within 10 miles of Jordan, said Gene Lindsey, president of the doctors organization.
“This opens the door to an enormous number of new opportunities,” Lindsey said.
The preliminary agreement is being closely examined by Local 1199 of the Service Employee International Union, which has close to 700 members at Jordan, but has long clashed with Beth Israel Deaconess, where management has resisted union efforts to organize.
Union members “will be vigilant during this process as we encourage investments in patient services, the hospital and its employees,” said Local 1199 vice president Jeffrey Fishbein. “It is vital that there is a transparent process while the community assesses whether or not the proposed acquisition will bolster the security of health care services for the Plymouth area.”