Sussex County’s Nanticoke Health System is planning to affiliate itself with the Maryland-based Peninsula Regional Health System.
The two nonprofits each signed a non-binding letter of intent last week to merge with a transaction known as a membership substitution. Under the deal, Nanticoke would become a corporate member of Peninsula and the two would share clinical resources.
Nanticoke President and CEO Steven Rose says the details have yet to be hashed out but the arrangement will likely have Peninsula providing the smaller Nanticoke with some financial support.
“It gives a little bit of security,” said Rose. “We are a small rural hospital and you know that there are a lot of small rural hospitals closing, particularly in the Midwest some of the critical access hospitals are finding it difficult to stay open. So I think this has been a very, very good thing for us.”
Rose says Nanticoke’s profit margins have gotten thinner in recent years with the rising cost of drugs. He also points to the Offices of Medicare and Medicaid Services rescinding Delaware’s rural designation in 2010 removing some Medicare rebates and reweighting diagnostic related groups to reduce rebates for conditions like congestive heart failure.
“We see a rise in drug costs quite a bit. That’s growing faster than we can keep pace with. Other expenses is we see a decline in our reimbursements,” he said.
Rose says he expects the two health systems to sign off on a definitive agreement this summer. The deal will then be scrutinized under Delaware’s Certificate of Review Program meant to provide oversight in health care developments.