St. Luke's Hospital of Bethlehem, Pa., is expanding its eastern Pennsylvania stronghold by assuming the assets and liabilities of Allentown (Pa.) Osteopathic Medical Center.
Under an agreement announced Sept. 24, Allentown Osteopathic will become a division of St. Luke's Hospital and part of St. Luke's Health Network, a regional integrated delivery system that includes five owned and affiliated hospitals with more than 750 licensed beds.
St. Luke's is positioning itself as the region's low-cost provider. According to the Pennsylvania Health Care Cost Containment Council, St. Luke's Hospital's 1995 average cost per adjusted discharge of $5,035 beat the regional average of $5,526. Allentown Osteopathic averaged $4,152 per discharge, while Lehigh Valley Hospital in Allentown, St. Luke's major competitor, recorded $8,660 per discharge, the council said. These figures reflect each hospital's average expense of treating a patient adjusted for the proportion of outpatient activity at each facility but not for case mix.
Allentown Osteopathic's merger with St. Luke's Hospital involved no exchange of cash but will involve some future investments in the osteopathic hospital's physical plant and equipment, a St. Luke's spokesman said. The amount to be invested hasn't been determined. In the year ended June 30, Allentown Osteopathic had total assets of $27.7 million.
In March 1995, Allentown Osteopathic adopted a five-year strategic plan that included a recommendation to merge or align with another hospital or health system. The merger announcement concludes nine months of discussions. The deal has been approved by regulatory authorities and is expected to be completed by Jan. 1, 1997.
John Sherwood, president and CEO of Allentown Osteopathic, will continue in that position. However, the hospital's board of trustees will cease to exist. Allentown Osteopathic will be represented on St. Luke's board.