The first not-for-profit hospital conversion in Pennsylvania is dead.
Primary Health Systems, a Wayne, Pa.-based for-profit hospital chain, has quietly called off its pending acquisition of Roxborough Memorial Hospital, a 129-bed not-for-profit hospital in Philadelphia.
More than two years in the making, the $23.3 million acquisition would have made Roxborough the first chain-owned hospital in the state and only the third for-profit facility in Pennsylvania (Nov. 3, p. 18).
The deal fell apart shortly after the two sides won approval from a state court, which reviewed the sale under Pennsylvania's charity laws. The Pennsylvania attorney general's office also previously cleared the sale of any problems.
Primary Health Systems did not return repeated calls for comment. Roxborough Chief Executive Officer John J. Donnelly Jr. declined to explain why the deal was terminated and whether it was killed by one party or by mutual consent.
The failed conversion deals a major setback to Primary, which has been unable to consummate a buyout in its home state. In May 1996, Primary announced that Roxborough would be the first of several acquisitions in the Philadelphia area. Instead, the for-profit company has watched as not-for-profit systems have gobbled up almost all the available properties in the metropolitan area.
As for Roxborough, Donnelly said, the hospital has reconvened a committee to look at other possible partners.
"Although we'll be aggressive, we're not going to do anything in a panic," Donnelly said. "We don't need to. We're making money and our balance sheet is strong."
Financial figures for fiscal 1997 were not available, but in fiscal 1996 Roxborough lost $1.8 million on revenues of $46.6 million, according to the Pennsylvania Health Care Cost Containment Council.
With PHS out of the picture, Roxborough is likely to turn to one of the neighboring not-for-profit systems.
In a statement, Roxborough said it intends to maintain "its independent non-profit, tax-exempt status" but explore business alternatives and affiliations.
In 1995, a year before its planned deal with PHS was announced, Roxborough signed a letter of intent to affiliate with Temple University Health System. A strategic plan prepared for Roxborough in 1993 by outside consultants identified Temple as the "only potential affiliate," according to court papers. After nine months of negotiations, however, the letter of intent expired.
Last week, a spokesman for Temple said "nothing was under way" with Roxborough at this point, but added, "You never say never in this business."