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As hospital merger advances, it's business as usual

It’s not quite official, but the merger between Halifax Regional Health System and Sentara Healthcare is nearing completion following the signature of an affiliation agreement between the two health systems.

There will be some changes, including the structure of the board of directors, but it will be business as usual in many other aspects, Halifax Regional Health System CEO Chris Lumsden indicated during a public meeting on Monday.

“We wanted to protect our people, our employees, and one of the decision points was which partner did we think would help us protect the now 1,200 employees that we have working here, and the 125 doctors,” said Lumsden.

However, the CEO said he doesn’t want people to think there won’t be changes.

“We’ve been dynamic over the years, and for the most part, I think the changes have been good. We would anticipate pay nor benefits will be unfavorably affected, possibly they will be enhanced as a result of the partnership,” he added.

 “We think Sentara surfaced to the top, and in their history, like Halifax Regional, they’ve never had an employee rif or layoff,” he added. “That’s impressive in a tough and challenging industry.”

It’s been more than six months since representatives from Halifax Regional Health System announced its merger with Sentara Healthcare, and they announced Monday the “due diligence” phase of the merger is nearly complete.

All that remains is the signature of the affiliation agreement by Virginia Attorney General Ken Cuccinelli, Lumsden said Monday prior to the public meeting.

Halifax Regional Health System originally announced its plans to affiliate with Sentara in October 2012, and both organizations have worked together since then through a due diligence phase.

The signed agreement will now move into a 60-day regulatory review phase by the Virginia Attorney General’s office, with a projected closing date of July 1.

The merger will not affect operations at auxiliary facilities under the Halifax Regional Health System umbrella such as The Woodview, Seasons at the Woodview and Volens Family Practice, according to Dave White, Halifax Regional Health System board of directors chairman.

The merged health system will maintain its relationships with Centra Healthcare of Lynchburg and Duke University Medical Center, according to White.

The shuttered South Boston Manor, recently purchased by the hospital, is not part of the merger agreement with Sentara, White explained, adding no immediate plans exist for that property located directly behind the hospital.

The board of directors will now include 18 members, 15 from Halifax Regional Health System and three from Sentara, with White serving the first three years as chairman, and Ken Krakaur, currently a senior vice-president with Sentara, serving as vice-chairman.

The chairmanship will rotate between the two partners every two years thereafter.

Halifax Regional Hospital is the first “rural” hospital in the Sentara family, and the decision to merge didn’t come until thorough research and visits by both partners to the other’s facilities.

“We didn’t just review proposals and make a decision, we had Sentara come here, and then we went out and visited their hospitals,” Lumsden said Monday.

“I didn’t just talk to their CEO, we talked to employees, patients, board members and management about the hospital and the system, and we verified what we heard was true.

“We documented Sentara had not just good, but excellent employee relations, that they have a great relationship with the medical staff.”

Sentara places an emphasis on recruitment and retention of doctors and employees, Lumsden explained.

Krakaur said Monday his organization has examined ways to use Sentara’s purchasing power to lower costs at Halifax Regional Health System, including a study of the “supply chain,” and “what Halifax Regional has paid for an item versus what Sentara has paid.”

“We found substantial savings have occurred as a result of that examination,” Krakaur noted.

In the two calendar years after merging with Sentara, Rockingham Memorial Healthcare in Harrisonburg and Martha Jefferson Hospital in Charlottesville have documented approximately $25 million in savings, according to Krakaur.

“We all know the medical industry has a significant upward pressure on pricing,” Lumsden added. “The affiliation will help that.

“It’s important to keep components of Halifax Regional Health System together as much as possible,” said Lumsden, adding the agreement protects those core services throughout the 10 years of the agreement, unless the local board initiates any changes.

The agreement will be for 10 years unless otherwise extended by both boards of directors.

“The monies and value of this organization will be put back into the health system, so there’s going to be a substantial amount of strategic capital that will be used at Halifax Regional over the next 10-plus years,” Lumsden said Monday.

“So, instead of taking the money and creating a foundation, we’re taking funds and plowing them back into the growth and success of Halifax Regional Health System going forward.

“Then there’s also a commitment toward routine maintenance capital, just to keep us modern and up to date as a health system.”

“There will be substantial capital invested by Sentara since we will become part of Sentara.

“We believe it will be a great benefit to Halifax Regional Health System going forward.”