Upper Chesapeake Health, Univ. of Md. Medical System to merge

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The Upper Chesapeake Health System and the University of Maryland Medical System Wednesday announced a merger that they hope to have completed by 2013.

Upper Chesapeake Health is the largest private employer in Harford County, and will join the third-largest private employer in the Baltimore metro area.

The first step of the merger will be the UMMS gaining control of two seats on Upper Chesapeake’s board of directors, which were previously held by St. Joseph Medical Center. St. Joseph had been a minority owner of UCH since 1998, but the UMMS will acquire St. Joseph’s ownership interest under the agreement.

The plan calls for the University of Maryland Medical System to provide funds for growth in services and clinical programs starting in October.

A key motivator in this agreement is the aging population of Harford County, Lyle E. Sheldon, president and CEO of UCH, said.

“As the population we serve grows and ages, the demand for specialty medical services will also grow,” Sheldon said in a news release. “Our goal with this agreement is to offer as many specialized services locally as possible.”

Upper Chesapeake Health, a not-for-profit health system, will add its two hospitals, Upper Chesapeake Medical Center in Bel Air and Harford Memorial Hospital in Havre de Grace, to make UMMS an 11-hospital system by 2013, in another move that will further consolidate health care in Maryland.

The reason behind health care consolidation could be traced to the health care reform that the Obama administration is demanding, and individual hospitals or small hospital systems may feel more secure as a part of a larger system, like UMMS or the Johns Hopkins Hospital and Health System, experts say.

“We feel that aligning with a dominant player in the state will position us to respond to what may happen with Obama’s health care reform in a better way,” said Sheldon.

Sheldon also said that a larger entity means dealing with skyrocketing expenses more easily.

“It wouldn’t surprise me that we end up with three or four large health systems in Maryland,” Sheldon said. “The expense associated with it will continue to grow. It seems to defy gravity.”

The University of Maryland School of Medicine was a large factor in the decision, Sheldon said. He said that students in their residencies would be assigned to Upper Chesapeake hospitals, providing physician recruitment that both he and John W. Ashworth III, senior vice president of network development for the UMMS and associate dean of the School of Medicine, said is key to the deal.

“We have found that they have been able to recruit physicians where we had difficulties before,” said Sheldon. “Through the School of Medicine, to work with their physicians, having this affiliation to the medical school that otherwise would not be there.”

Ashworth said that the demand for health care is going up twofold for Harford County.

“The demand curve is a combination of the baby boom generation and the growing population,” said Ashworth. “When Upper Chesapeake looked at their demand curve, that’s why they felt that we would be a good partner for them.”

The additional capital provided by the merger will help UCH continue to grow, said Sheldon, as the UMMS’ bond rating is very good.

“We’ve had a lot of success over the past 10 years with building a new hospital and seeing our market share grow,” Sheldon said. “We think that having this affiliation will allow us to sustain a very good performance, access to physicians and access to capital. Without them we just don’t think that those opportunities would be available to us.”