Font ResizeWellSpan and PinnacleHealth, which operates in the Harrisburg area, said Friday their boards have agreed to pursue a merger, with a final agreement possibly coming by early 2010.
Talks of some kind of affiliation began earlier this year. Both companies say the merger idea is not a result of financial problems.
It is instead aimed at providing better health care to an aging population spread throughout the suburbs of the neighboring cities of Harrisburg and York and expanding health coverage to residents who are uninsured and under-insured.
"We are expecting to see reduced and/or bundled payments from the government for both Medicare and Medicaid services," said Rick Ayers, a WellSpan spokesman.
York County is home to more than an estimated 57,000 residents age 65 or older, according to the U.S. Census Bureau.
"You do need to think regionally in this market," said Lisa Henry, spokeswoman for PinnacleHealth.
For example, if a man lives in the Dillsburg area and has diabetes, he might have a primary care doctor in Gettysburg, an endocrinologist in York and a cardiologist in Harrisburg.
To manage someone's care in such a position, it would be best to have one umbrella organization so information and
Coordination, education
Putting the communities -- in this case their health systems -- together also would help combat another issue.
Should the merger become reality, the new organization, over time, could establish a common electronic health record system that would foster the coordination between physicians and health care workers, Ayers said.
Aside from improved coordination, the merger promises to bolster the new organization's educational services, which are aimed at addressing a projected shortage of health care workers.
Those of the baby boom generation will soon leave the medical profession and it could prove hard for health care providers to replace that staff, Ayers said.
"At the same time, you will see more patients living longer," he said.
Also, Henry said combining the education resources offered by PinnacleHealth and WellSpan Health can help make for a bigger name to attract and retain health professionals.
For example, while some residency programs are offered at both Pinnacle and WellSpan, others are only offered at one or the other.
Combining the systems would allow a greater opportunity for employees to learn.
Upsides, downsides of mergers
Competition is becoming increasingly important as the health care demand increases, with potential shortages in health care professionals.
Health economist Stuart Altman of Brandeis University said helping to attract and retain health professionals, as well as goals of providing more holistic care to patients, are positive aspects of potential mergers.
But he also said mergers can create monopoly powers for health care providers in an area.
If a person's insurance company has previously negotiated rates with providers who compete against each other, a merger between those competitors can mean an insurer gets charged a higher price in the end for the care of the person it insures.
Altman said often, insurance companies come out against proposed mergers.
Altman also said health care reform efforts in Washington might influence mergers.
He said lump-sum payments, an idea associated with outcome-based health care, is one idea in the policy mix.
With such payments, insurers would look to pay one payment for the overall care of patients.
If all the health care professionals who work on those patients' care are within the same umbrella health care company, it would be easier to work such a system, Altman said.
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