Holy Redeemer Health System and Abington Health have called off their proposed partnership, just weeks after signing a letter of intent to create a new regional health system in New Jersey and Pennsylvania.
The plan was severed amid controversy that Abington Memorial Hospital would cease offering abortion services once the system was finalized in spring 2013
"Any type of family planning offered by a health care facility is problematic for the other institution, but then there are community concerns, too," said Stephen A. Timoni, an attorney with K&L Gates LLP who has helped health care organizations structure joint ventures. "If you're offering those services in a community already, it's hard to take them away, because it's a community need — so it becomes a huge problem."
Timoni said any type of partnership between a Catholic-rooted health system and a secular one offering family planning services ultimately needs approval from the Vatican, so in order for Holy Redeemer and Abington's regional system to work, they would have needed "to figure out a way to still offer those services and sever their connection to the Vatican," noting that one way to do so is to "spin off family planning services into a totally nonconnected nonprofit that's unrelated to the Catholic institution," though it would have required more resources.
According to Timoni, during due diligence periods, hospitals usually devote "many manpower hours and internal resources with regards to the financials of the deal," and Holy Redeemer and Abington had been nearing the end of the first month of their three-month due diligence period — which was enacted by the letter of intent in June — when they broke off their partnership on July 18.
"If each group has adequate staff in their financial departments, then there wouldn't be recorded costs, but there would be many work hours. Other times, they contract out to an accounting firm, and that can be expensive," Timoni said. "With legal due diligence, many law firms charge an hourly rate, which has to be paid regardless of whether or not the deal closes. And if a breakup fee hasn't been agreed to, then each is responsible for its own costs. It's not a scientific calculation … but it can get very expensive."
William R. Sasso, chair of Huntingdon Valley, Pa.-based Holy Redeemer — which serves 11 counties in New Jersey — said in a statement "both organizations have a fiduciary responsibility to ensure that we are meeting the needs of the communities we serve in the most effective way possible," which he said could have been facilitated by the new regional system.
In a statement, Robert M. Infarinato, chair of Abington, Pa.-based Abington Health, said the partnership would "help both organizations move toward shared goals" of adhering to principles outlined in President Barack Obama's health care reform, such as closer alignment between health systems, physicians and providers to lower costs and ensure enhanced coordination of care within a population.
"Together, we had a bold vision that we believe would have served our community well," the health groups said in a joint announcement, adding they both "will continue to seek opportunities to enhance the health of the communities we serve."