Other hospital mergers in Western North Carolina have been economically successful and have resulted in more services in the region’s rural counties.

When Mission Hospital in Asheville merged with St. Joseph’s in 1999, the new company saved $80 million by combining support, infrastructure and clinical departments. Mission Health now owns the hospitals in Spruce Pine and McDowell County.

Joe Damore, the system’s president and chief executive officer, said those mergers continue to make economic sense for the system. The smaller hospitals refer patients to the specialists at Mission.

WestCare is also the product of a merger. The system was created eight years ago with the merger of Harris and Swain County Hospital.

Damore said shared programs — everything from laundry services to diabetes specialists — have been the keys to saving money, in his experience.

“There are options for savings in merging similar hospitals,” he said. “We have seen significant savings, especially when we have shared services.”

Damore, who has been at Mission for about a year but has worked on other merger deals, said hospitals save the most in agreements that eliminate duplicated services.

He said Mission, the largest employer west of Charlotte with about 6,000 workers, is unsure how a combined WestCare-Angel provider could impact the market.

Damore said Mission plans to keep its second air ambulance helicopter at Angel.

“We look for opportunities to work together,” he said. “As not-for-profits, that’s what we should be doing.”

WestCare, Angel and Mission Health are both not-for-profits. That means they must invest all of their revenue after expenses into improving infrastructure, hiring more workers or adding services.

Hospitals do compete for some parts of the medical market, said Lindrooth, whose study “Hospital consolidation and costs: Another look at the evidence” was published in the November 2003 Journal of Health Economics.

In the 1990s, many urban hospitals merged to fight an insurance company tactic called “selective contracting.” The insurance companies used the tactic to shut out one service provider in an effort to get lower prices from others.

The mergers saved hospitals money when two facilities combined, such as the Mission Hospital and St. Joseph’s merger.

In mergers where the hospitals kept separate facilities, called system acquisitions (where one hospital or group buys another), the cost savings were small or non-existent.

Lindrooth’s study, which he co-authored with David Dranove of Northwestern University, compared 81 hospitals that merged to 810 similar hospitals that did not merge, and 41 hospitals that consolidated into systems to 410 similar hospitals that did not consolidate between 1989 and 1996.

The median system acquisition showed a cost reduction of 2.2 percent after two years, no savings after three years, and 3 percent after four years. The median combination of two hospitals averaged cost savings of about 14 percent in the same timeframe.

Lindrooth said the proposed merger, even if it doesn’t save WestCare or Angel money, could be good in the long run.

“Rural hospitals have been in dire financial straits for a while now,” he said. “Their survival has been called into question.”

Angel and WestCare have not had financial problems in recent years. Neither hospital plans to buy the other outright, according to board members.

Another question WestCare and Angel board members will deal with is the federal government’s tough new stance on the impact hospital mergers have had on consumers.

Last month in Chicago, a judge separated Northwestern Healthcare Corp. from Highland Park Hospital after a Federal Trade Commission investigation showed that merger resulted in prices that were as much as 10 percent higher than similar hospitals.

Lindrooth said if the ruling makes it through the appeals process, the FTC would start looking at other mergers.

Damore said Mission has a unique agreement with the state called a Certificate of Public Advantage that puts cost increases under the supervision of the state Attorney General’s Office and the state Department of Health and Human Services. It makes the company exempt from federal anti-trust regulations.

Mission is the only hospital in North Carolina with the agreement.

Anchia, who lives in the Jackson County community of Whittier with her newborn daughter, son and husband Rick, said quality service was most important to her when choosing a hospital.

She said her only concern with the merger is potential for the loss of personal care at Harris. Anchia is originally from Hendersonville and has used large, metro hospitals in the past.

“You are just a number and you are out the door,” she said.

Lindrooth said the impact of mergers on service quality varies. He also said the impact on the hospital work force varies. Some hospitals have cut their work forces after mergers eliminated duplicate services. Others have added staff.

“For consumers, there has been some recent research showing that mergers will lead to higher premiums,” Lindrooth said. “On quality, the jury is still out. Some studies have shown less competition will lead to poorer outcomes.”

Board members at WestCare and Angel say they want to avoid layoffs and improve service. They are asking for comments from the public to help them decide whether the merger is the right plan.

Angel Board Chairman Dr. David Hill, when asked whether he would support a merger even if it did not save money, said there is more research left to do.

“The answer is that we have simply not researched all of the questions and interests involved and are not yet to a point where we can firmly say it would be in the best interest of the public,” he said. “Both boards are striving to do their homework to help ensure that whatever decision reached will be in the best interest of the patients we serve.”