Trouble is brewing at two northern outposts of the mighty University of Pittsburgh Medical Center Health System, even though the two hospitals share nothing in common when it comes to bottom lines.
In Pittsburgh's burgeoning North Hills section, UPMC Passavant, one of the financially strongest in the 16-hospital not-for-profit system, is struggling to break free of its 3-year-old merger with the system.
About 34 miles to the northwest in Aliquippa, Pa., some community members are in an uproar over the system's plans to remove the last 24 acute-care beds from UPMC Beaver Valley after Jan. 1 to help plug a flood of losses.
The system's community relations disaster seems to run counter to conventional wisdom of the late 1990s--that bigger is better when it comes to hospital affiliations.
If nothing else, UPMCHS has a little time on its side: attorneys agreed last week that they will wait until April 2001 for a binding arbitration hearing to resolve the dispute between the system and UPMC Passavant.
That will be more than one year after UPMC Passavant first aired its unhappiness with the 1997 merger. Complaining that the system was ruling with an iron hand, the 199-bed hospital first invoked the arbitration clause in its merger agreement last March (March 27, p. 28).
System officials adamantly refuse to even discuss a divorce.
They contend that dissolving the relationship is not permissible under the merger agreement, said Jane Duffield, a UPMCHS spokeswoman. However, the agreement does call for binding arbitration to resolve any disputes, she added.
Meanwhile, UPMC Passavant's actions aren't helping matters any on UPMCHS' Aliquippa front. UPMC Passavant officials are pointing to UPMC Beaver Valley as an example of what happens when the "UPMC" sign is put on a small community hospital.
With its acute-care beds gutted, the former Aliquippa Hospital, which merged with UPMCHS in 1996, will be left with only 16 skilled-nursing beds and 26 psychiatric beds. UPMCHS also wants to lay off about 175 UPMC Beaver Valley employees, although officials say they are confident most will find other jobs within the system.
UPMCHS officials vow that in the coming months they will work with the community to explore alternative uses for the Aliquippa facility.
The Passavant Hospital Foundation isn't buying it.
"I feel strongly that is what happens when local boards lose control," said Ralph DeStefano, chairman of the foundation's board of directors, a voluntary position. "I don't think (Beaver Valley) should close. I think it's a disservice to those people in the community."
DeStefano was chief executive officer of Passavant for 10 years leading up to the merger, then moved over to UPMCHS to serve as a senior vice president before retiring in July 1999. A member of the system's board, he voted against closing the last of the acute-care beds at UPMC Beaver Valley.
Citing the arbitration, DeStefano would not comment on what went sour in UPMC Passavant's relationship with the system. But in published reports, UPMC Passavant officials have complained that UPMCHS was dictatorial. DeStefano has publicly criticized the system for spending "tens of millions" on buying physician practices only to lose much of the investment in the past fiscal year.
"We sympathize with the plight of the people of Aliquippa, but our resolve is strengthened to make sure it doesn't happen in the North Hills," DeStefano said.
George Huber, senior vice president and counsel at UPMCHS, similarly expressed concern about discussing the UPMC Passavant situation in light of the arbitration.
Huber noted, however, that based on the bottom line, the UPMC Beaver Valley and UPMC Passavant situations are markedly different.
In the fiscal year ended June 30, UPMC Beaver Valley lost $7.3 million, although $3.5 million of that was offset by Medicare appeals from the previous year, according to UPMCHS officials.
"We put $24 million into that hospital, and it has not generated the community support to make it financially viable," Huber said. "We think it's in an area that is over-bedded and there are better ways that hospital can be utilized."
On the other hand, UPMC Passavant, --which has been flush for 10 years running, according to DeStefano--has been even flusher under UPMCHS' stewardship, Huber said.
Citing the arbitration again, officials would not release the most recent financials. But for the fiscal year ended June 30, 1999, UPMC Passavant reported net income of $6.6 million on revenue of $87 million, up from net income of $4.8 million on revenue of $81 million in the previous year.