The proposed acquisition of Northwest Health System, Oil City, Pa., by UPMC Health System, Pittsburgh, is taking longer than expected because the two sides are still hammering out the details of a new hospital, which is the centerpiece of the deal.
"It just has taken a lot longer than either party anticipated," said Dean Eckenrode, senior vice president of insurance services and regional network development at 16-hospital UPMC.
Though the two sides have worked out a definitive agreement, closing the deal worth about $57 million is dependent on the price and design of the new hospital to be built in Venango County, Pa.
"We're two-thirds of the way there," Eckenrode said.
UPMC and Northwest, which operates a two-campus hospital, first announced the deal last year when a letter of intent was signed. At the time, the sale was expected to close by year-end (Oct. 11, 1999, p. 18).
The Venango County Orphan's Court, which oversees not-for-profit ownership changes, and the Pennsylvania attorney general still need to approve the deal, now expected to close this fall or winter.
The UPMC board is expected to vote June 22 on the definitive agreement. The Northwest board of directors approved the agreement last month.
As part of the deal, UPMC has committed to spend up to $50 million on a new hospital. UPMC also will pay $7 million to the Northwest Medical Center Foundation, which is not part of the merger and will remain independent. The deal also excludes another foundation.
Eckenrode said the deal with Northwest is a "strategic investment" for UPMC and the third time it has linked with a rural healthcare system.
UPMC's nearest facility is 286-bed UPMC Horizon, which includes campuses in Greenville and Farrell, Pa. The UPMC Horizon campuses are in Mercer County, which is adjacent to Venango County.
Eckenrode said UPMC also would seek federal antitrust clearance of its deal with Northwest.
"We don't expect any insurmountable problems," he said.
Merging Northwest into UPMC will create UPMC Northwest, a new subsidiary of UPMC.
The linchpin of the deal is the new hospital that will replace Northwest's flagship, 176-bed Northwest Medical Center, which has campuses in Franklin and Oil City.
A 1993 court settlement that resulted from litigation following the creation of Northwest prohibits the new hospital from being built in either Oil City or Franklin, said Roger McCauley, Northwest's senior vice president of finance and administration.
Construction of the new hospital is expected to begin next spring.
Once the new hospital is built, the old facilities will either be used for alternative purposes or torn down.