Lawrence & Memorial Hospital executives are in talks with counterparts at The Westerly Hospital about a possible strategic alliance that could lead to a merger. New London-based L&M, Eastern Connecticut's largest hospital, announced Wednesday it has signed a non-binding letter of intent with Westerly, just over the state line in Rhode Island. The letter authorizes start of a due diligence process to determine if a merger or other form of affiliation is in the best interests of the institutions and their communities, L&M and Westerly said in a press release. "In these challenging times, and given the enormous changes being thrust upon hospitals, it is increasingly common for hospitals to explore opportunities to lower costs and enhance patient care through new organizational models and new inter-organizational relationships," L&M President and CEO Bruce D. Cummings said in the release. L&M has 280 beds at its main campus facility and also operates the Pequot Health Center in Groton. A merger with 125-bed Westerly would create a unique cross-border alliance.