To understand why Hanover Hospital is the only health care facility in the midstate that has not merged with another health care organization is to understand the Hanover area.
“This is a proud and independent community,” said Hanover Hospital board Chairman Paul Spears. “Many people were born and raised here. Their great-grandparents are buried in the cemeteries here. Everyone is proud of this hospital and, despite the economic challenges, we’re still in a strong financial position.”
Hanover Hospital had net patient revenue of about $137 million and total operating expenses of $133 million in fiscal-year 2013, according to the Pennsylvania Health Care Cost Containment Council, which tracks hospital performance across the state. That represents a nearly 3 percent increase in revenue since 2010 and a 0.9 percent increase in operating expenses at the same time.
That’s not to say the hospital board hasn’t thought about a merger. In 2003, Hanover pursued a deal with York-based WellSpan Health, which operates York, Gettysburg and Ephrata hospitals. The deal was scrapped because of concerns from the state attorney general over antitrust regulations.
It’s also not to say Hanover wouldn’t consider affiliating with other health organizations to provide services in this community that crosses from York to Adams counties.
“We’re willing to look at our options, but to remain independent is our goal,” said President and CEO Jim Wissler.
The trend in the hospital industry is to merge. WellSpan, a nonprofit, took over Gettysburg Hospital in 1998. In January, Community Health Systems, a for-profit based in Tennessee, acquired Health Management Associates and its three midstate properties — Carlisle Regional Medical Center, Lancaster Regional Medical Center and Heart of Lancaster Regional Medical Center; it also operates Memorial Hospital in York. In June, Holy Spirit Health System and Geisinger Health System announced an affiliation.
And earlier this summer, Penn State Milton S. Hershey Medical Center and PinnacleHealth System signed a letter of intent to form a new health organization in the midstate, pending state regulatory review.
“It’s an upward trend,” said NERA Economic Consulting health economist Subbu Ramanarayanan. He cited data from analyst Irving Levin Associates that found nearly 100 merger and acquisition transactions nationwide in 2012. In 2003, that number was close to about 40.
Fallout from the Patient Protection and Affordable Care Act, coupled with changes in reimbursement structures have helped drive this, Ramanarayanan said.