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Meriter Hospital

The acquisition of Meriter Health Services by an Iowa health system will strengthen both, officials say. As part of the move, Meriter's insurance company, Physicians Plus, Meriter’s insurance company, will expand to Iowa and Illinois.

Meriter Health Services plans to become part of UnityPoint Health, a health system based in West Des Moines, Iowa, that has 15 hospitals and more than 280 clinics in eight regions of Iowa and Illinois.

Meriter’s board voted late Wednesday to affiliate with UnityPoint, which will acquire Meriter’s assets and own most of Physicians Plus, Meriter’s insurance company, Jim Woodward, Meriter’s president and CEO, said Thursday.

Meriter patients will continue to receive care in the Madison area, but Physicians Plus will expand to Iowa and Illinois, Woodward said. Meriter’s name will change to UnityPoint Health-Meriter as Madison’s independent community hospital system seeks the market power and potential cost savings of being part of a larger organization.

“Meriter is going to be much stronger and has a much brighter future” because of the affiliation, Woodward said. With UnityPoint’s commitment to high quality care, cost effectiveness, community services and strong doctor groups, “they’re a very good cultural fit,” he said.

Bill Leaver, president and CEO of UnityPoint Health, said the nonprofit, nondenominational health system has been pursuing affiliations “to get to a size and scale that we think will be sustainable in the long run in a complex health care environment ... We see Meriter as a strong organization.”

The affiliation will not cause staff layoffs, Woodward and Leaver said. It is pending state and federal regulatory approval, a process that typically takes a few months.

UnityPoint Health’s closest hospital to Madison is UnityPoint Health-Finley Hospital in Dubuque, Iowa.

Keeping local control

Meriter will maintain local autonomy through its local governing board, Leaver said. Decisions about what services are provided by Meriter and how capital is spent will remain local, he said, though UnityPoint will have final say over bylaws and the operating budget, and will appoint the CEO.

“What made UnityPoint Health such a good fit for Meriter and the Madison culture is that they really focus on keeping business local,” said Virginia Graves, chairwoman of Meriter’s board.

Two Meriter board members will serve on UnityPoint’s board. Meriter’s 3,500 employees will continue to work for Meriter except for the Meriter Medical Group’s 120 doctors, who will become part of the multi-state UnityPoint Clinic, Woodward said.

The affiliation will allow Meriter to borrow money at a lower interest rate through UnityPoint Health’s superior bond rating and purchase medical equipment and services such as information technology cheaper as part of a larger group, Woodward said. Like Meriter, UnityPoint uses Verona-based Epic’s electronic medical records.

The biggest change could be to Physicians Plus, which UnityPoint plans to become majority owner of by early next year, Woodward said.

UnityPoint, which doesn’t have an insurance company, plans to expand the Madison-based HMO into Iowa and Illinois, he said.

“It brings some financial stability to Physicians Plus and the ability to grow more aggressively in larger markets,” Woodward said.

Physicians Plus has struggled financially in recent years, losing $30.3 million last year and $15 million the first half of this year. It has about 84,000 members, down from more than 110,000 in 2011.

The HMO this year started requiring members to go to Meriter instead of UW Hospital for some services and get approval to see some UW specialists.

It also made some people who had UW primary care doctors switch to Meriter doctors.

Though the “care navigation” policy reduced Physicians Plus membership, it will help the HMO and Meriter financially in the long run by keeping more care in the Meriter system, Physicians Plus president and CEO Linda Hoff has said.

Collaborations

Meriter was formed in 1986 as a merger of Madison General Hospital on South Park Street and Methodist Hospital, which was near the Capitol.

In 1998, a Meriter-affiliated group of doctors merged with UW Medical Foundation, UW-Madison’s doctor group.

Meriter and UW Health collaborate on services such as maternity care, fertility care and the Madison Surgery Center.

But they have been competing against each other more since talks of a joint operating agreement between them ended in 2011.

This May, Woodward told Meriter employees that he and the Meriter board were looking at partnering with another health care organization.

Jeff Grossman, president of UW Medical Foundation, said he’s “cautiously optimistic that a new affiliate will help us to create a better relationship” with Meriter.

Dr. Robert Golden, dean of UW School of Medicine and Public Health, said it’s too early to tell if the new partnership is good news or bad news for Meriter’s relationship with UW Health.

“The devil is in the details,” he said.

Donna Katen-Bahensky, president and CEO of UW Hospital, said she hopes Meriter executives reconsider the care navigation policy so services can be provided in the “appropriate environment,” whether it’s at UW or elsewhere.

Meriter’s collaborations with UW Health will continue as long as Meriter’s leaders want them to, Leaver said.

UnityPoint is preparing to stave off potential confusion over the name of UW Health’s insurance company: Unity.

“I think we can mitigate that confusion,” Leaver said. “We are working through that with trademark counsel.”

In addition to Dubuque, UnityPoint’s other locations are in or near Cedar Rapids, Des Moines, Fort Dodge, Sioux City and Waterloo, Iowa; Peoria, Ill.; and the Quad Cities in both states.

UnityPoint started in Des Moines in 1993, when Iowa Methodist Medical Center, Iowa Lutheran Hospital and Blank Children’s Hospital merged to form Iowa Health System.

Iowa Health System added hospitals in the other regions — most recently in Peoria two years ago — and changed its name this April to UnityPoint Health.

UnityPoint has more than 24,000 employees, counting those in the eight regions, and annual revenues of $2.7 billion.

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David Wahlberg is the health and medicine reporter for the Wisconsin State Journal.