BREWER – Eastern Maine Healthcare Systems, which presides over a sprawling regional network of hospitals, medical practices, laboratories, ambulance services, medical suppliers and other related businesses, is proposing to build a new 150-bed, $150 million hospital in Waterville.

The move has sparked a high-stakes conflict with MaineGeneral Health, the third-largest hospital system in the state, which also claims the Waterville territory.

EMHS filed a letter of intent with the state’s certificate of need, or CON, office in December, a preliminary step to submitting a full-blown application in March of this year.

The Waterville area’s health care needs now are met by three hospital facilities, all originally built circa 1960. In addition to the care available at EMHS’ tiny 48-bed affiliate, Inland Hospital – the former Waterville Osteopathic Hospital – the area is served by the more substantial facilities of MaineGeneral Medical Center, a subsidiary of MaineGeneral Health.

MaineGeneral has two campuses in Waterville: Thayer Hospital, where acute care services are provided, and Seton Hospital, which houses an inpatient physical rehabilitation unit as well as outpatient programs. A third MaineGeneral facility, an outpatient cancer center, is under construction. Like EMHS, MaineGeneral has ambitious expansion and consolidation plans of its own and is not amused by the larger system’s unilateral proposal to build “a new, single, modern hospital” in the city. EMHS is surpassed in size only by the MaineHealth system, based in Portland.

Testy efforts to find a collaborative middle ground have ended in failure, and in December MaineGeneral submitted its own application to the CON office for a $107 million addition and renovation project at its 109-bed Thayer Hospital campus. If the state approves MaineGeneral’s application, Thayer would relocate virtually all patient care areas into modern, efficient spaces and phase out older sections of the hospital. It is unclear yet what would happen to the Seton facility. The number of inpatient beds at Thayer would increase to 170, eliminating the need for the new hospital proposed by EMHS.

This might seem like a perfect storm of corporate competition brewing, but without collaborating, neither health care system is likely to get the green light to develop the major facility they both envision – especially under Gov. John Baldacci’s tightened-up regulatory review for big-ticket health care projects.

Dr. Robert Strong, a professor in the University of Maine School of Business and a former member of Gov. Angus King’s Maine Healthcare Finance Commission, said in a recent interview that the stalemate in Waterville reflects the mounting tension between ambitious health care corporations and state government regulators.

“We all want the same thing,” he said. “When we get sick, we want to be able to get in the car and drive a mile and a quarter and get the best care there is. Doctors want the latest stuff to work with, and patients want the best stuff, too. But Maine is a huge state with a small population, and we can’t afford to have high-level health care on every street corner.”

When Maine hospitals compete with one another, he said, the cost to the public goes up.

“Health care is different from other businesses,” he said. “All businesses are trying to grab market share, and the same inclinations and motivations are there in health care, but we can’t afford to do it.”

Inland’s recently appointed CEO, John Dalton, said in an interview last week that the people of the Waterville region deserve better, more comprehensive care than either MaineGeneral or Inland can deliver in their current patched-together facilities. Inland recently established a sleep study center and is about to revamp its labor and delivery area. But at some point, Dalton said, it just doesn’t make sense to keep pumping money into old buildings.

A brand-new hospital would offer the Waterville community a wealth of benefits, Dalton said, including better infection control, greater privacy, improved communications, and the ability to plan for future trends in medical practice. In addition, with EMHS in the background, the new hospital would have access to an advanced administrative network and the powerful clinical resources of Eastern Maine Medical Center, just 50 miles north in Bangor.

But another push for the new hospital comes from the EMHS corporate offices on Whiting Hill in Brewer. In a recent interview, acting corporate CEO Dan Coffey said establishing Waterville as EMHS territory will strengthen the system as a whole, ultimately benefiting all hospitals and consumers in the nine-county EMHS service area.

“All companies need to expand their market share,” Coffey said. “If there are markets to the south of us, we have a good business reason to invest there.”

MaineGeneral Health also has good reasons to invest in Waterville. Over the past seven years, according to CEO Scott Bullock, the corporation has sunk more than $20 million in upgrades to its surgical, maternity, endoscopy, radiology and emergency facilities and services at the Thayer unit. With all of these recent investments, Bullock said, it doesn’t make sense to scrap Thayer in favor of a whole new hospital.

Many physicians in the Waterville area also have expressed their unwillingness to support a new hospital that’s governed out of Brewer. Shortly after EMHS announced its intentions last fall, 112 physicians on the MaineGeneral medical staff took out a full-page ad in the Waterville Morning Sentinel opposing the new hospital and insisting that any local hospital “should be controlled and administered by people from our community – our friends and neighbors.” The ad also expressed “faith in MaineGeneral’s administration” and its commitment to the Waterville community.

Anesthesiologist Dr. David Landry said recently that many Waterville doctors are uncomfortable with EMHS’ “top-down culture” and insistence on building a whole new hospital.

“Not everyone’s after new bricks and mortar; it’s really not the best use of our health care dollars,” Landry said. “I wonder what the Bangor community thinks about EMHS spending millions of dollars to duplicate services in Waterville when that money could be spent improving care in Greenville or other communities.”

Dan Coffey at EMHS said physicians and others in Waterville need not be concerned about losing the local governance of a new hospital. Although affiliated hospital boards are appointed by and answer to the corporate board in Brewer, Coffey said many clinical and administrative decisions are made at the local level.

“We don’t have a ‘command and control’ style,” he said.

Coffey declined to comment on the nature of the failed negotiations between MaineGeneral and EMHS, other than to say that MaineGeneral CEO Bullock has “rejected out of hand” the possibility of actively affiliating with EMHS. Coffey said he hopes that, as time goes by, talks between the two hospital systems will resume.

Because MaineGeneral already has filed a completed application to expand Thayer, that project is already under review in the certificate of need office. A recommendation to approve or deny must be made to the commissioner of the Department of Health and Human Services by the end of March.

Eastern Maine Healthcare’s final application is due before that time, with a recommendation to come in early summer. Despite the separate application cycles, the projects may be reviewed as competing measures, according to Catherine Cobb, director of the Division of Licensing and Regulatory Services within DHHS.

If the commissioner rejects a project, Cobb said, applicants must wait at least three years before reapplying.

While Waterville’s health care needs might best be served by a collaborative effort, the state can’t force the two hospital systems to work together, Cobb said.

Trish Riley, director of Gov. Baldacci’s Office of Health Policy and Finance, said the showdown in Waterville calls for a judicious review and serves as a good example of why the recently developed statewide health plan is needed.

“It really begs the broader question of how we position our health care resources and make sure we have hospitals where we need them,” she said. She added that the state is considering legislation that would make it easier for hospitals to work together without running afoul of state or federal antitrust laws.

“It’s going to cause a lot of fur to fly,” observed Steven Michaud, executive director of the Maine Hospital Association. “It’s pretty obvious there won’t be two new hospitals in Waterville. Either the hospitals will have to sort it out, or the state will. That’s what the certificate of need office is for.”