Two healthcare giants in Pennsylvania's Delaware Valley signed documents last week officially establishing the integrated healthcare system they agreed to form more than a year ago (April 18, 1994, p. 20).
After months of poring over the de-Consolidations
tails, Main Line Health System, Radnor, Pa., and Thomas Jefferson University, Philadelphia, formally agreed to create a new not-for-profit corporation called Jefferson Health System.
The new system will become the corporate parent of 622-bed Thomas Jefferson University Hospital and 1,207-bed, four-hospital Main Line Health System. Each partner has committed $5 million to fund the system's operations.
To carry out the plan, Thomas Jefferson University will spin off its academic and healthcare operations into two separate corporations.
"From a legal and logistical standpoint, the easiest thing would have been just to dump everything into the system*.*.*.*rather than to try to split off the hospital," acknowledged Paul C. Brucker, M.D., president of Thomas Jefferson University and chairman of the board of Jefferson Health System.
But executives involved in the creation of Jefferson Health System weren't anxious to assume the mission or financial responsibility for the university's academic and research activities and the university's board was loath to relinquish those responsibilities, he said.
Severing the hospital from the university will require approval by the Internal Revenue Service and the trustee for bondholders. It's hoped that the approvals will be obtained by July 1, 1996, at the latest.
To create Jefferson Health System, a series of agreements must be carried out. One agreement describes the lead- ership and structure of the new health system. Another makes Thomas Jefferson University the primary academic affiliate of the system's hospitals.
The parties also have attempted to unwind old financial ties between the university and the hospital and create new ones. For example, un-der an agreement for the transfer and operation of Thomas Jefferson University Hospital, the university will be compensated for providing clinical staffing services. Brucker said the formula is complicated and has yet to be completed.
Another agreement calls for the university to retain property rights to the hospital. Thomas Jefferson University Hospital will lease its facilities under a rent that covers debt obligations incurred by the university on behalf of the hospital. About half the university's $300 million or so of outstanding debt is linked to hospital expenses, Brucker said.
Douglas S. Peters, Main Line's president, will serve as the system's president and chief executive officer.
Jefferson Health System will oversee operations at Thomas Jefferson University Hospital's two acute-care campuses, an ambulatory-care center and its Children's Rehabilitation Hospital in Philadelphia. The system's Main Line affiliates include Lankenau Hospital, Wynnewood; Paoli (Pa.) Memorial Hospital; Bryn Mawr (Pa.) Hospital; Bryn Mawr Rehabilitation Hospital, Malvern; and Main Line's visiting nurse, home-care and hospice company, called Community Health affiliates.
In addition, West Jersey Health System in Camden, N.J., and Media, Pa.-based Riddle Memorial Hospital have signed letters of intent to join the system.
Although each hospital in the system will retain local governance, Jefferson Health System will approve their strategic plans and their operating and capital budgets. The decentralized management structure preserves local control and respects the history and legacy of individual institutions, Peters said.
Jefferson Health System doesn't plan to enter the insurance business but will consider aligning with an existing insurer or a managed-care company.
Peters said system executives have had discussions with the area's two largest insurers-Independence Blue Cross in Philadelphia and U.S. Healthcare in Blue Bell, Pa.
How physicians will be linked to the system has yet to be determined. Several physician organizations are affiliated with Main Line hospitals, and the faculty physicians of Thomas Jefferson University have their own multispecialty group practice. "The challenge will be to find ways to fit them together," Peters said.