Yielding to community outrage over the impending closure of the emergency room and all acute-care services at a small local hospital, the beleaguered Pittsburgh-based UPMC Health System is transferring ownership of the facility back to the not-for-profit community group that previously ran it.
The 24-bed UPMC Beaver Valley hospital in Aliquippa, Pa., is in far better shape for having been affiliated with the larger system. The facility, built in the 1950s with the help of the company town's steelworkers through a payroll deduction plan, is free of debt and polished and shined thanks to about $40 million UPMC invested in it in the past five years. But ongoing fiscal problems remain.
In a deal brokered by Pennsylvania Attorney General Mike Fisher after a December public hearing he hosted in Aliquippa, UPMC sweetened the community's victory even further by offering $2.5 million in working capital to see the hospital through the transition.
These days the mammoth Pittsburgh system is fighting fires on all fronts. In addition to the troubles in Aliquippa, it finds itself trying to close a controversial merger proposal with Children's Hospital of Pittsburgh (April 9, p. 5). And last week, UPMC embarked on binding arbitration with another unhappy hospital that wants out of the system, 199-bed UPMC Passavant in the North Hills section of Pittsburgh (Nov. 6, 2000, p. 26).
But both sides involved in the Aliquippa situation characterize their breakup as more like a civilized annulment than like the bitter divorce that has recently characterized ill-conceived hospital mergers. The peaceful resolution to the heated community debate also points to the increasingly active role that attorneys general and community groups are playing when health systems threaten to close or drastically scale back services at struggling community hospitals (Jan. 29, p. 22).
"We think it's a good agreement for the community, and it keeps this valuable asset open," said Sean Connolly, a spokesman for Fisher.
The deal easily won approval in Pennsylvania Orphans' Court on March 19. After a three-week due-diligence period, the transfer becomes official April 17. Beaver Valley, the former Aliquippa Hospital, then becomes Aliquippa Com-munity Hospital.
Although the ownership transfer represents a humbling defeat for UPMC, it could in the end be a Pyrrhic victory for the community. UPMC, which minus Beaver Valley will have 15 acute-care hospitals and a 300,000-member health plan in its stockpile, simply failed to turn around what the community had failed to turn around once before.
Licensed for 183 beds, Aliquippa left a trail of red ink for 10 years before UPMC acquired it in May 1996, said Jane Duffield, a UPMC spokeswoman. UPMC has spent $16 million in capital improvements and $14 million in working capital, including the assumption of $6 million in bond debt. UPMC invested another $10 mil-lion in some money-losing physician practices at the hospital, she said.
"We put in time, energy and money in order to make this a magnet setting because it's in a good location," Duffield said. "But for various reasons we were not able to make it a profitable facility, despite our best efforts and intentions."
Under the UPMC banner, the hospital posted one break-even year. In the fiscal year ending in June 2000, the operation lost $7.3 million. UPMC officials projected losses for the current fiscal year at $6 million. The financial situation prompted them to announce last fall that they would lay off 175 workers and shutter all acute-care services by this month, leaving only 22 skilled-nursing and mental health beds. They were on track to do that when the ownership transfer was brokered, whittling a staff of 401 workers to 310 and closing 22 of 46 staffed beds.
"We wish more people from the community had elected to use it while it was under UPMC and when we made such dramatic improvements," Duffield said.
Officials at Woodland Health Resources, the not-for-profit community group that is taking back control of the hospital, admit they cannot bask in the glory for long. The hospital long suffered from a lack of referrals even before UPMC hung out its sign.