UPMC Health System, Pittsburgh, gave $5 million to the struggling St. Francis Health System, also in Pittsburgh, to help St. Francis "get over its current financial distress," a UPMC spokeswoman said.
The $5 million, paid to St. Francis Friday, is an unrestricted gift and does not have to be repaid, said Jane Duffield, a spokeswoman for 16-hospital UPMC.
Four-hospital St. Francis lost $17 million on $292 million in operating revenue in the fiscal year ended June 30, 1999. Financial data for the fiscal year that ended Friday was unavailable.
In a separate deal, St. Francis announced it had signed a letter of intent for a management contract with UPMC for its 32-bed St. Francis Hospital Cranberry, in Cranberry Township, Pa. The agreement is effective Sept. 1.
St. Francis announced earlier plans to consolidate its two Pittsburgh hospitals into one by Sept. 1 (June 12, p. 14).
By accepting UPMC's $5 million gift, St. Francis was able to decline a $5 million strings-attached grant from Highmark Blue Cross and Blue Shield in Pittsburgh.
Highmark's offer included a provision that only half of the $5 million would have to be repaid if St. Francis partnered with two-hospital Pittsburgh Mercy Health, the city's other Roman Catholic system. Pittsburgh Mercy is part of Catholic Health East, Newtown Square, Pa., a major UPMC competitor in the Pittsburgh market. If St. Francis partnered with someone else, the $5 million would have to be repaid in full, Highmark spokesman Michael Weinstein said.
Weinstein said Friday he wasn't aware of the details of UPMC's gift.
"We will continue to encourage a long-term partnership involving Mercy Health System and St. Francis to maintain a strong faith-based health system in the Pittsburgh region," Weinstein said.
If such an arrangement occurs, it could work to Highmark's advantage when contracting with the systems. Recently, Pittsburgh Mercy expressed interest in partnering with St. Francis (June 19, p. 4). The likelihood of such a deal is unclear.
Highmark has helped struggling hospital systems before.
Last year Highmark guaranteed a $125 million loan for two-hospital Western Pennsylvania Health System to allow West Penn to acquire the four remaining hospitals of Allegheny Health, Education and Research Foundation by assuming their debt. A $429.5 million bond offer to consolidate the six hospitals into West Penn is pending.
That move by the dominant insurer in the area led to complaints by physicians and UPMC that Highmark might discriminate against other providers (March 29, 1999, p. 2).
Highmark, which has 2.6 million enrollees, posted net income of $68.6 million on revenue of $8.2 billion in 1999.