Negotiation in Health Care Case Study

Easton Hospital (EH), a 369-bed hospital, is located in the Lehigh Valley of Northampton County, Pennsylvania. It serves 300,000 residents of the county, employs about 1,500, and offers an array of specialties including renal dialysis and open heart surgery. Currently, EH maintains a not-for-profit status.

Easton’s financial woes, demonstrated by an expected loss of $1.5 million for the 2000 fiscal year, prompted a search for a capital partner. In February 2001, Easton announced its entry into an exclusive negotiating process with Tenet Healthcare Corporation. Tenet, the nation’s second largest hospital chain, proposed to acquire all Easton Hospital and property, providing enough capital to retire long-term debt and create a non-profit community benefit organization. In the process of the proposed acquisition, Easton would lose not-for-profit status and begin paying property tax.

While EH demonstrated hopes for a successful merger, concerns about Tenet were evident. Studies have shown that for-profit hospitals reduce care for the indigent. EH traditionally has provided this service and would hope to continue. Tenet has had a troubled history. A spokesman for the California Nurses Association reported that Tenet prolongs negotiations, provokes nurses into striking, and will not discuss issues of patient care with nurses. Tenet’s activity over the last seven years is to purchase community hospitals, then to streamline and cut staff.

Essentially, the proposed negotiation between EH and Tenet consisted of a 60-day review of the hospital. Several doctors reported that during this time Tenet representatives asked pointed questions about operations and plans. Tenet admitted examination of EH financial records and extensive interviews with physicians, nurses and community leaders. Tenet did not comment on specifics.

Essentially, Tenet engaged in information gathering, but not in feedback. After sixty days, Tenet announced that it would not acquire EH. Easton hospital officials said Tenet declared its financial requirement and hospital labor costs as obstacles to continued negotiation. A Tenet spokesman did not agree with this statement, and maintained that Easton did not fit the criteria for acquisition growth. Tenet typically chooses top market ranking hospitals to acquire.

The process of Tenet’s acquisition of Easton Hospital was labeled as a negotiation period. At the end of the sixty-day period, when Tenet backed out of the process, it characterized this time as a diligence period. At this time, EH physicians were angry and disappointed that the deal could not be made. Nurses and support staff was anxious over prospects of job loss. Many individuals at EH expressed fear that since Tenet had rejected them, no one else would be interested. Edicts of blame were levied at hospital administration.

When EH and Tenet characterized this time frame as a period of negotiation, they implied a two-sided process that would end in a mutually beneficial arrangement. Tenet invested time and money in the acquision process, and ultimately withdrew because criteria were not met. EH invested time and hope into the process. They continued to lose money in this good faith period.

EH currently continues its search for a viable capital partner. Given the negotiation style of Tenet, EH may well be better off with a different partner.

References

Harper, T. (2001). Has Easton Hospital found its partner? (2001, February 26). Eastern Pennsylvania Business Journal, 12, (8) p.1. Retrieved June 13, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

McDermott, J. (2001). Can private company heal Easton Hospital? Tenet Healthcare might take it over. Meanwhile, doctors are split on where to place blame. (2001, April 30). Morning Call, p. A1. Retrieved June 16, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

McDermott, J. (2001). Tenet calls off talks with Easton Hospital. Official at financially troubled facility says it will keep searching for a partner. (2001, May 5). Morning Call, p. B1. Retrieved June 16, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

Prospect of new kind of hospital raises questions. (2001, February 27). Morning Call, p. A10. Retrieved June 13, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

Sharp, K. (2000). Hospital chain out of recovery But while Tenet Healthcare has grown very profitable, workers are discontent. (2000, August 20). Orange County Register, p. K01. . Retrieved June 13, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

Smithee, A., (2001). Easton Hospital can be a leader. (2001, May 13). Morning Call, p. A16. Retrieved June 16, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

Wildrick, K.H. (2001). Easton offers fine patient care. Morning Call, p. A14. Retrieved June 16, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

Wlazelek, A. (2001). Easton hospital looks to Tenet for aid. If negotiations succeed, it would become the region’s first for-profit hospital. (2001, February 24). Morning Call, p. A3. Retrieved June 13, 2001 from ProQuest 5000 database (Research Library Periodicals) on the World Wide Web: http://www.apollolibrary.com and http://proquest.umi.com/pqdweb

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Copyright 2001 Stephen R. Marsh
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