A new Mercy | Blocks from Maine Medical Center, Portland's other hospital completes a multimillion upgrade critical to its growth

Mercy Hospital opened its 44-acre campus, including a new hospital and medical offices, along the banks of the Fore River in Portland this month. It’s a major milestone for the city’s second hospital, which hopes to move all of its its operations out of its 70-year-old State Street building to the new complex within 10 years. It’s a level of expansion the city has seen recently from its other hospital, too — the new Mercy now sits down the hill from the imposing bulk of Portland-based Maine Medical Center, which completed part of a $150 million expansion in September as well.

Competition between the two hospitals is described by both as friendly, but it definitely exists. Their respective expansions have focused not on increasing bed space, which remain the same, but on providing new and improved services both hospitals say are necessary to stay current.

“We’re not growing in terms of hospital beds or even, for the most part, in terms of patients,” said Eileen Skinner, president of Mercy since 2002. “What we’re doing is bringing a 1940s and 50s hospital into the 21st century.”

While the term “right sizing” has become a bit of a buzzword, Skinner says it applies to Mercy’s Fore River campus. “In a number of ways, the State Street campus no longer met our needs,” she said. “It was as if medicine were still being practiced as it was 70 years ago.”

Among the important considerations for Mercy’s project was to provide private rooms for patients to replace semi-private rooms that no longer meet standards for treatment and infectious disease control. The new hospital on Fore River will also allow disparate activities to be performed on a single floor, rather than scattered around the State Street building. The hospital’s new breast care unit, for instance, offers procedures from basic screening to surgery in a single setting.

“We’re moving all the functions that require short stays, and parking, to Fore River,” Skinner said. That includes most outpatient treatment and maternity services, minus the emergency room.

The scale of Mercy’s $85 million expansion, and Maine Med’s project at nearly double that cost, has raised concerns about whether paying for all this infrastructure will raise health care costs.

Mary Mayhew, vice president for government affairs at the Maine Hospital Association, says the trade group doesn’t have specific standards for how member hospitals like Mercy and Maine Med should compete, but said MHA does support the state’s certificate of need process. CON reviews determine whether proposals are medically necessary and do not duplicate what other hospitals are providing. Mayhew noted that both the Mercy and Maine Med projects received state approvals.

While hospital overbuilding has inflated health care costs in other parts of the country, according to Boston-based health care analyst David Wennberg, it may not be a problem in Portland, even with two rapidly growing hospitals.

One sign that Mercy and Maine Med do not have excessive costs is that they offer most procedures at a lower cost than most other Maine hospitals, said Tim Prince, vice president for planning at Mercy.

Healthy competition

Yet both hospitals do look for a competitive edge. In a current television advertising campaign coinciding with Mercy’s new campus opening and Maine Medical Center’s ER upgrade, Mercy suggests quick service is available at Mercy’s emergency room as opposed to other hospitals.

Prince said that the “speed with which patients are seen does indeed help attract patients,” but that quality of care and outcomes are more important in convincing them to return.

Mercy’s Fore River campus now features a 151,000-square-foot main building plus an 80,000-square-foot medical office building. Mercy leases 42,000 sq. ft. in the building and retains ownership of the land.

In all, what the hospital is calling Phase 1 will cost $85.3 million. Phase 2, which Mercy hopes to complete by 2018 — its 100th anniversary — involves the construction of another 200,000-square-foot building and a parking garage, for which planning has just begun. Mercy has concept approval from the city for the whole campus, but when exactly it will take shape is not yet clear. The current division will retain 130 beds at State Street and 38 beds at Fore River, for most outpatient and short-stay visits.

The project is financed with a 30-year, $64.3 million bond issued through the state, a $7.2 million equity investment for purchasing the land and a $16 million capital campaign that exceeded its goal by $1 million.

When Phase 2 does begin, it’s expected to involve 30 months of construction, tentatively planned for 2012-2015. “Whatever happens, we’ll be there by 2018,” said Prince. “That’s an imperative.”

In the meantime, the hospital will make minor renovations to the 230,000-square-foot State Street building and continue to operate on both campuses for the next several years.

The impetus for the new Mercy began with the mid-1990s talks among Portland’s three hospitals — Maine Medical Center, Mercy and Brighton Medical Center — that in 1995 led to the merger of Brighton, the smallest of the three, with Maine Medical Center, the largest. The early 1990s recession and a push toward managed care had squeezed bottom lines and led to concerns about whether the smaller hospitals would remain viable. After the merger of the city’s other hospitals, Mercy immediately began thinking expansion. “When Brighton closed, we picked up the osteopathic training,” Mercy President Skinner explained. “That started pressing at the seams, and we started to think about changes.”

Skinner was not working for Mercy during the 1990s merger talks, but says the hospital has a distinctive mission quite different from Maine Med’s, even though both are nonprofit corporations, that requires it to pursue charitable efforts.

“As a Catholic hospital, we really do make decisions differently,” she said. “It’s hard to pin down, but when certain opportunities come up — such as outreach to Haiti — we know we’re going to do them whether or not they seem to fit the bottom line.” One of Skinner’s current tasks is to review some of the hospital’s charitable programs to see if they can produce revenue or find endowments so they can be sustained in the future. “It’s not a question of whether we’ll do them, just how long we can,” she said.

Maine Med is currently licensed for 606 beds, while Mercy has 230. Though it has been outpaced by Maine Med, Mercy is still larger than all but a handful of the state’s 37 acute care hospitals. “We looked at what it would take to expand at State Street, and it just didn’t work,” Prince said. “The strategies with which we’d overcome the barriers to medical care had been exhausted.”

For instance, the State Street hospital doesn’t have pathways for computer cables. The plumbing was outdated, and changing it required “extraordinary expenses” for even small modifications, Prince said. “The building’s limitations had gone from being neutral, in terms of offering new services, to being a real hindrance.”

The new campus will allow Mercy to grow its specialties, which include the birthing center, women’s breast center, foot and ankle clinic and school of radiology/imaging.

Service overlap?

Skinner believes Portland can sustain two large hospitals, something that’s in question in smaller Maine towns with multiple institutions.

In Brunswick, Mid Coast Hospital is challenging a plan that might save its rival, Parkview Adventist Medical Center, from financial collapse. Parkview, which recorded a $7.5 million operating deficit last year, recently filed a proposal to be acquired by Central Maine Medical Center in Lewiston, a move vigorously opposed by Mid Coast, which contends the Brunswick-Bath area can support only one full-service hospital.

And in Waterville, a plan to consolidate two campuses filed by MaineGeneral, which earlier merged Kennebec Valley Medical Center in Augusta and Mid-Maine Medical Center in Waterville, has run aground over objections by the other Waterville hospital, Inland. After Inland declined to join Mid-Maine in the 1990s, it was acquired by Eastern Maine Medical Center in Bangor. Eastern Maine and MaineGeneral have now filed competing expansion plans, but the state has approved neither, so three hospital campuses remain in business in Waterville.

Back at Maine Medical Center, Richard Petersen, interim president and former chief operating officer, agrees that the two-hospital arrangement works well in Portland. “There’s definitely a place for both. We have a community mission, but we’re also the tertiary care facility for the entire state and parts of New Hampshire,” Petersen said. “There may be some overlap in services, but it’s quite small.”

One recent public controversy between the hospitals occurred in 2004 when Maine Med proposed building 10 outpatient operating rooms at its satellite campus in Scarborough at a cost of $27.3 million. Petersen said the operating rooms were needed to replace five previously offered at Brighton, and to open in-patient surgical beds on the main campus.

Mercy sharply disagreed that the expansion was needed. Prince said to the Portland Press Herald at the time, “It’s just so over the top, what they’re trying to do.” Near the end of the comment period, Mercy filed a formal objection, saying that it could lose up to $7 million in patient volume annually.

Ultimately, the Department of Health and Human Services’ Certificate of Need Division approved construction, and the new operating suites were built in 2005. The new building ended up filling faster than projected, and today all 10 suites are in use, MMC’s Petersen said.

Despite this public airing of differences, cooperation seems the hallmark of the hospitals’ relationship rather than contention. Howard Buckley, who led Mercy for 26 years before retirement in 2002, said he believes it has a great deal to do with the relationship between hospital CEOs.

“I always felt I could go down the street and have a talk without whoever it was who was my counterpart,” Buckley said. “We didn’t always agree, and we sometimes had vigorous differences, but it was always civil. I’m not sure you could say that happens in many other communities.”

Plus, at this point, there seems to be plenty of business. “Maine is an aging state, and an older population requires more health care,” Petersen said.

It seems clear that, in some respects, the two hospitals do compete in the community.

Maine Med, for instance, covers all of Maine and a portion of New Hampshire for tertiary care involving the most severe accidents and illnesses. Mercy, meanwhile, has a smaller primary service area of central Cumberland County. In Portland proper, it provides about 30% of hospital services, said Mercy’s Prince, and Maine Med handles the rest.

But Mercy’s reach into “rim areas” in York County, as far up the coast as Brunswick and into the western interior areas, is also significant. In those communities, Mercy’s market share can be as much as eight percent, even with local hospitals nearby.

The bottom line, Prince said, is that without the new campus, “Mercy would have been able to hold steady,” but it would have been “inhibited in growth” and would not have been able to improve the efficiency of its operations.

Mercy is now well positioned. “We really do believe in patient choice,” Mercy’s president Skinner said. “We’re not afraid to compete, even though our charitable mission is also paramount.”

Douglas Rooks, a writer in West Gardiner, can be reached at editorial@mainebiz.biz.