October 10, 2011 | last updated May 16, 2012 4:30 pm

Athol Hospital Sees Vanguard Deal As Key To Future

Athol Memorial Hospital made headlines recently when it was ranked one of the best hospitals in the country by The Joint Commission, a nonprofit hospital accreditation organization, joining five other Massachusetts institutions.

"I think we showed that, along with a lot of other small hospitals in the country, that we do really good quality care," said Athol Memorial President and CEO Steve Penka.

The 25-bed hospital intends to remain small, but not independent.

It's in the process of being acquired by Vanguard Health Systems, the owner of Saint Vincent Hospital in Worcester and MetroWest Medical Center in Framingham and Natick. That will mean becoming a for-profit hospital, assuming the change meets with state approval.

But Penka said the acquisition won't hamper its ability to provide excellent care.

Athol Memorial announced its intention to join Vanguard in March 2010. Penka said the two parties are now working under a letter of intent — which is being kept private — and going through a due diligence process.

"That's taking longer, I think, than anyone would suppose," he said.

He said the lengthy process is necessary for both parties to make a prudent decision, but he doesn't know when they'll complete the process and actually sign a deal.

Dennis Irish, vice president of marketing, government and community relations at Vanguard, said the company has a policy of not commenting on pending mergers or acquisitions.

Agreement Expected Soon

James Mann, chairman of the hospital board, expects an agreement "very shortly." He said financial terms of the deal aren't yet clear.

"It's really a moving target because they're purchasing the assets of the organization and that changes month to month," Mann said.

As of the end of March, Athol Memorial listed total net assets of $5.5 million in a state filing.

The hospital has struggled financially in recent years, facing an operating loss of $1.3 million in fiscal 2009, $832,556 in fiscal 2010, and $400,864 for the first half of 2011. It's a critical access hospital, meaning it gets assistance from the federal government to provide care in a rural area that might otherwise not be adequately served.

Stand-Alone Woes

Penka said small, independent hospitals will face even more difficulties in the near future, as government and market forces push providers to form accountable care organizations, or ACOs. These groups bring doctors, hospitals and other providers together in caring for a particular group of patients, and they also act somewhat like HMOs in sharing financial risk.

"It would probably not be the best idea for a small 25-bed critical access hospital to try to develop an accountable care organization by itself," Penka said.

Joining up with Vanguard will probably mean patients who need care that Athol can't provide will be most likely to get treatment at Saint Vincent or MetroWest, Penka said, but they will always have access to other hospitals if they could get more appropriate treatment there.

A Push Toward ACOs?

Timothy Gens, executive vice president at the Massachusetts Hospital Association, said he hasn't watched the situation in Athol closely. But he said hospitals and physicians' groups across the state are looking at ways to adjust as the ACO concept takes hold, either through mergers or more limited affiliation agreements. He said he expects the state Legislature may take action on payment reform measures by early next year that would push providers to adopt ACO models.

"I think there's a lot of conversations going on," Gens said. "It's started, but it's far from over."

Athol Memorial began moving toward the deal with Vanguard after putting out a request for proposals and looking at other possibilities for affiliation. Penka said Vanguard promises to keep Athol's existing staff and its name, and make sure it has the resources to keep providing good, local care.

The local part is important, Penka said. He said all health care professionals strive to do the best possible job with their patients, but they have an added incentive at a place like Athol because there's a good chance they know someone in a hospital bed.

"Because we're smaller, we do take care of our neighbors and our families," he said.

Athol Selectman Stephen Raymond vouches for the closeness between the hospital and the community. In fact, he says, his wife works there. Even outside of that personal connection, though, he said the hospital is important.

"It's a real asset to the whole North Quabbin area," Raymond said. "We certainly would like to see it maintained, and I think Vanguard will do that."

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