Deal between Dartmouth Health and Catholic Medical Center collapses after NH AG calls it unconstitutional

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Joanne Conroy, CEO and President of Dartmouth-Hitchcock Health, and Joseph Pepe, CEO of GraniteOne Health
Joanne Conroy, CEO and President of Dartmouth-Hitchcock Health, and Joseph Pepe, CEO of GraniteOne Health, are pictured during a meeting in Manchester, NH on January 16. The two organizations have signed a letter of intent to merge into a not-for-profit health system, Dartmouth-Hitchcock Health GraniteOne. Dartmouth-Hitchcock photo by Mark Washburn

Editor’s note: This story by Nora Doyle-Burr first appeared in the Valley News on May 13.

LEBANON — Dartmouth Health and GraniteOne Health, which includes Manchester Catholic Medical Center, are abandoning plans to combine forces after the state attorney general’s office said the proposed collaboration would violate New Hampshire’s constitution.

The New Hampshire Attorney General’s Office released a report Friday opposing the proposed combination.

In a statement, Attorney General John Formella said the suit would violate a clause in the state constitution that requires “free and fair competition in trades and industries.”

“Free, fair, and robust competition is essential to providing employers and patients with options for lower-cost, high-quality health care services,” Formella said in a news release Friday. “Our state has seen significant health care consolidation over the past few years, and this transaction to combine two of our four largest systems is unacceptable without proper consumer protections in place.”

Formella, the son of the late Nancy Formella, a former DH leader, raised concerns about the proposal’s effect on health care costs. Specifically, the report highlights the likelihood that the combination will “adversely impact competition” for certain healthcare services in the Manchester region, in the South West region of the state and for certain services in the statewide.

“With no remedies in place to protect the public from harm and ensure that the combined system delivers the promised benefits, the transaction as proposed is not something I can approve of,” he said in the statement.

The collapse of CMC’s proposal marks the latest setback in DH’s ongoing efforts to find a partner in the most populous southern part of New Hampshire.

“While we disagree with the outcome of the regulatory review and are deeply disappointed, we respect the process that led to this decision,” DH CEO Joanne Conroy said in a letter. email sent Friday to employees.

However, Conroy acknowledged that combining forces with GraniteOne – which officials once described as essential to DH’s future – may not make as much sense today as when the parties began negotiations.

“During the 2-3 years of scrutiny by state and federal authorities, the dynamics of the healthcare landscape in New Hampshire – and beyond – have continued to change dramatically,” Conroy wrote. “Despite the unforeseen challenges of the pandemic, Dartmouth Health and GraniteOne remained committed and focused on how we would deliver the benefits and promise of the combination for our patients and communities. But it has become clear to us that those benefits and promises we envisioned years ago are no longer practical and realistic in today’s environment.

DH, which has an annual operating budget of over $2 billion, and GraniteOne, which has an annual operating budget of over $600 million, first announced in January 2019 that they planned to join forces. The organizations said at the time that they planned to build on the two health systems’ pre-existing clinical collaborations in obstetrics, prenatal and postnatal care, oncology, rheumatology, endocrinology and intensive care.

They also said they aimed to reduce costs by integrating back-end services and data sharing, and to increase access to specialist services in smaller, more rural hospitals. The three members of GraniteOne would have had the chance to join the Dartmouth-Hitchcock Obligated Group, giving them increased access to credit.

Lauren Collins-Cline, spokeswoman for GraniteOne, said “the parties have not been able to agree to all of the terms” in an emailed statement on Friday.

“We came to an impasse late afternoon (Thursday) and we will not receive the regulatory approval we need to move forward,” she said. “This result is disappointing for GraniteOne Health and its members – CMC, Huggins Hospital and Monadnock Community Hospital. It is also disappointing for New Hampshire patients and communities. Based on the public forums we held last fall , it was clear how much the community supports our organizations and recognized the benefits this combination would have brought.

Besides the 396-bed DHMC, the DH system includes the Alice Peck Day Memorial Hospital in Lebanon; Cheshire Medical Center in Keene, NH; Mt. Ascutney Hospital and Health Center in Windsor and New London Hospital. In addition to the 330-bed CMC, GraniteOne includes Huggins Hospital in Wolfeboro, NH and Monadnock Community Hospital in Peterborough, NH

Under the combination, each hospital would have continued to operate under its own board of directors, but would have been managed by a single CEO and two regional presidents. DH CEO Joanne Conroy would have been the CEO of the new system. In addition to the three executives, seven of the new system’s board members would have been appointed by Dartmouth Health and five would be from GraniteOne.

Given CMC’s relationship with the Catholic Church, some anti-abortion activists had opposed combining the two healthcare systems. But the deal, signed in September 2019, had the approval of the Reverend Peter Libasci, the Bishop of Manchester, and had been reviewed by the National Catholic Bioethics Center. The agreement included clauses giving CMC leaders the power to change CMC’s philosophy and goals, including its Catholic identity.

But other changes at CMC, Huggins and Monadnock, such as budgets, management of major assets, changes to health services and adoption of strategic plans, would have required approval from the expanded board. The extended board, in consultation with the chairmen of the board of Huggins or Monadnock, could also have removed a director; hired, evaluated or fired a general manager; and requires hospitals to participate in system-wide initiatives. CMC would have retained its final authority to remove a director, or hire or fire a chief executive.

It’s not the first time that DH has been looking for a partner in the south. He was in talks to create a formal affiliation with Manchester-based Elliot Health System, but ended them in 2017. The following year, Elliot partnered with Nashua-based Southern New Hampshire Health to create SolutionHealth , combining the 296-bed Elliot Hospital with the 188-bed Southern New Hampshire Medical Center.

In 2010, when Nancy Formella was one of the leaders of DH, the attorney general’s office rejected an attempt by Dartmouth-Hitchcock to acquire Catholic Medical Center.

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