LRGH vetting potential partner

LACONIA — LRGHealthcare has identified a potential partner that could help it solve financial problems and allow growth, CEO Kevin Donovan said Thursday.

The name of the organization is being withheld while due diligence work continues, he said.

Donovan said he notified staff Wednesday about the pending affiliation to ease potential worries. There have been a series of hospital mergers in New Hampshire in recent months.

“We were getting lots of questions about the flurry of activity,” he said. “A partnership will likely be in our future. We wanted to formally come out and say to our staff, ‘Don't worry, we're being thoughtful and being positive of the interest being shown in our organization.’”

Dartmouth-Hitchcock and GraniteOne Health, which includes Catholic Medical Center in Manchester, announced plans last month to join operations.

Mark J. Bonica, assistant professor of health management and policy at the University of New Hampshire, said there are reasons community hospitals like LRGH would seek an affiliation with a larger, academic hospital like Dartmouth-Hitchcock or Massachusetts General Hospital.

“It gives a community hospital access to a higher level of care and resources they can't get on their own,” he said. “If LRGH were to go with an academic medical center like Dartmouth or Mass General, it would gain a close relationship with an organization able to provide a higher level of care for patients.”

In such a relationship, known as vertical integration, the teaching hospital benefits by having increased access to complicated cases.

Another possibility is what is known as a horizontal merger, where two hospitals that are closer in size join forces to realize economies of scale, improved market presence and create the ability to share higher-level, expensive providers, he said.

“LRGH itself might not have sufficient caseload for a specialist, but if they could merge with Concord Hospital, they might have enough caseload to attract a particular kind of specialist,” Bonica said.

When LRGH closed its maternity ward last year, it began a loose affiliation with Concord Hospital under which women would get prenatal and postnatal care in Laconia, with babies being delivered in Concord.

Declining birth rates, high costs and challenges in finding providers mean that the maternity center is unlikely to reopen in Laconia, Donovan said.

A merger would provide other benefits, he said.

“The community would see positive programs and services,” Donovan said. “We would have an increased ability to serve the community.

“We have little resources to invest in new technology, programs and recruitment of medical staff. Any partnership would bring resources to the table to do that.”

Donovan said LRGH has a $50 million capital improvement list.

“Without a strategic partner, I don't know how to accomplish that without additional resources,” he said.

“It would also ensure long-term sustainability. For the last five years or so, we have been somewhat at the whims of monthly financial performance. One bad month and we have to react quickly. With a larger system, we would have more resources.”

Donovan said no job layoffs are expected.

Health care organizations have been merging throughout the nation amid a difficult financial environment marked by high costs and low reimbursement rates. 

Donovan said LRGH lost about $5 million in the fiscal year ending Sept. 30.