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Beacon Health System and South Bend Clinic suspend merger plans

The proposal, which faced review by the feds, had generated concern from the head of the St. Joseph Regional Medical Center.

Posted on April 16, 2014 at 1:10 p.m.

A proposed acquisition that would have increased the number of physicians under the Beacon Health System umbrella by perhaps 90 has stalled.

The turn generated disappointment from a Beacon rep, Vince Henderson, head of the Physicians Governance Council of Beacon Medical Group. But that doesn't mean an end to the growth of the non-profit entity, parent company of Elkhart General Hospital and Memorial Hospital in South Bend.

The area population is aging, which, along with reforms in the Affordable Care Act, will augment demand for health care services, Henderson indicated. "We are going to need to grow and expand to meet that need," he said Wednesday, April 16.

From the archives:

Beacon Health System, with 225 physicians, and the South Bend Clinic, with around 90, announced plans last year to merge, with Beacon acquiring the South Bend-based operation. But after a preliminary review by the Federal Trade Commission, the two entities decided to suspend the plans, which had generated concern from the head of St. Joseph Regional Medical Center, a competing Mishawaka-based hospital.

"It has become evident that dramatic changes in health care, along with a challenging regulatory environment, would extend the review for at least another 12 to 18 months and with no assurance of regulatory approval," Beacon Health System said in a press release Wednesday. The "unplanned extension" would pose a financial burden and cause uncertainly, the statement continued, thus Beacon and South Bend Clinic reps decided to halt their plans.

Henderson said Beacon and South Bend Clinic officials learned of the longer FTC timetable in recent weeks. In January, Beacon Health System Chief Executive Officer Phil Newbold had expressed hope in an interview with The Elkhart Truth that the FTC review would've been completed this spring.

'LESS PRESSURE TO COMPETE'

When Beacon and South Bend Clinic reps first announced their merger plans June 21, 2013, Al Gutierrez, the St. Joseph chief executive officer, expressed reservations, worried about the concentration of health care delivery in one entity. Beacon took shape only a year earlier as the parent company of Elkhart General Hospital and Memorial Hospital, after officials at the facilities, up till then independent, decided to merge into a two-hospital system.

Notwithstanding Beacon's announcement Wednesday, Gutierrez subsequently said in a statement of his own that he'd keep up his vigilance.

"We believe free competition is best for healthcare, patients and this region. When a health system in a community controls too many physicians, that health system is in a position to demand higher prices, driving up the cost of healthcare with little pressure to innovate or improve quality," Gutierrez said. "We will continue to be watchful for any anti-competitive practices."

Henderson, though, downplayed any threat the merger would have posed.

Most physicians and patients in the area "put faith and trust in Beacon and the South Bend Clinic to do the right thing," he said. Beacon and the South Bend Clinic each have specialists that the other lacks and joining forces would have improved the ability to make medical references and reduced redundancies in lab tests, among other things.

He acknowledged that the Beacon system has grown, in part through acquisitions, most recently of Bristol Street Pediatrics, an Elkhart-based medical group geared toward children. Physician recruitment, though, has accounted for most of the system's development, 40 new doctors in 2013 alone, Henderson said.

"Beacon is trying to meet the needs of our patient population. Whatever that looks like, that's what we're trying to do," he said.

Follow reporter Tim Vandenack on Twitter at @timvandenack or visit him on Facebook.


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