Franklin’s Angel Medical Center and the Sylva-based WestCare Health System have begun discussions that most likely will lead to a merger, forming a new nonprofit hospital chain serving Jackson, Macon and Swain counties.

Although it is undecided exactly how a merger would take effect, chairmen of both AMC and WestCare’s board of trustees have indicated that neither hospital would buy out the other. Rather, a collaborative service agreement would wipe the slate clean and create a separate 501c3 consisting of AMC and WestCare’s Harris Regional Hospital in Sylva and Swain County Hospital in Bryson City.

“Basically the WestCare brand name would be toast,” said David Hill, newly elected chairman of the AMC board and board member since 1991.

“The new corporation will probably have God knows what name,” he said, citing wordage that would get across the new entity’s tri-county service area.

Currently, WestCare is independently owned and operated while AMC holds a management contract with Quorum Health Group. Quorum is the nation’s largest manager of nonprofit hospitals, owning 21 acute care hospitals and providing management services to 212 hospitals nationwide.

In 2001, Quorum had to pay an $82.5 million settlement to the U.S. government over charges of filing false cost reports and overbilling the Medicare program. Quorum, whose alleged violations spanned a 15-year period from 1985 through 1999, was owned by HCA-The Healthcare Co. until 1989. HCA executives were convicted in 2002 of cheating federal health care programs.

AMC was involved in the Quorum fraud suit for having billed cases that should have been coded simple pneumonia as complex pneumonia. In a September 2003 press release hospital officials blamed the improper billings on “incorrect advice from a billing consultant.” AMC paid out $1.1 million to settle with the U.S. government.

In July of this year, Angel’s medical staff and the medical executive committee held a vote of no confidence in hospital CEO Mike Zuliani, effectively ousting him from his job. The hospital’s chief financial officer quit at approximately the same time.

Quorum brought in interim CEO Paul Gatens, the former CFO of Georgetown Hospital in South Carolina. Gatens will serve until the hospital’s board of trustees can hire someone new. While Quorum is advertising the position, Hill said the board has complete control over who is selected to fill the position.

The newly hired CEO most likely would remain head of AMC should a merger with WestCare occur, with the two healthcare entities undertaking a joint search for a system CEO, Hill said.

“That has yet to be seen,” Hill said. “That is amongst the many questions that have not yet been perfectly answered. The theory would be that each hospital is going to have to have a CEO on site to manage it on a daily basis.”

WestCare board chairman Jim Manring said that should a merger occur between AMC and WestCare, hospital management most likely would not be contracted out to Quorum.

“It would be doubtful that we would be interested in hiring a management firm because we’ve been successful with our own people,” said Manring, who is finishing up his first year as board chairman and has been a member for nearly 10 years.

Maintaining local hold over the Sylva hospital is important to Boyce Deitz, who has been a financial contributor to WestCare.

“I don’t want to see our hospital become a corporate owner facility,” said Deitz, who is married to hospital administrative secretary Sandra Deitz. “I just think it’s great that we’ve still got a community-owned facility.”

Hospital representatives made the announcement last week that AMC and WestCare’s boards of trustees were “about to begin” a formal discussion about developing an integrated healthcare system; however, the boards have met three times already to discuss collaborative services, a move intended to lay some groundwork prior to going public with the potential merger, Manring said.

So far, meetings have not included hospital administrators with the exception of WestCare President Mark Leonard, who also is on WestCare’s board of trustees. The boards have been said to be exploring ways of increasing the availability and quality of medical services; seeking cost savings; and finding ways to attract and retain doctors and their families.

Initial thoughts include consolidating basic hospital needs such as accounting, billing, health information systems, legal, physician recruiting and fund raising efforts, Manring said.

A merger is not, however, in the immediate future, Hill said. It will mostly likely take two years for the technicalities to be worked out.

“Eighteen months would be a miracle, 18 months would be everybody fell in love with everybody, everybody agreed with everybody. That ain’t going to happen,” Hill said.

So far, Hill said that he has heard little about the potential service agreement from AMC doctors and staff, though he knew that the issue would most likely cause a divide.

“One of the largest concerns they have now is simply the uncertainty involved, a feeling we’re holding great secrets,” Hill said.

However, that feeling is unfounded, Hill said, as the AMC and WestCare boards are in a purely exploratory phase necessitated by the rising costs of health care.

“We would be idiots not to evaluate all the options that are available to smaller, rural hospitals,” Hill said.

AMC and WestCare are fortunate enough to represent two of the state’s few healthcare systems that are breaking even.

“Both of us have managed to operate in the black. That it itself is a minor miracle,” Hill said.