In two separate deals, Catholic Health East last week took major strides toward selling two financial underperformers in Western Pennsylvania to secular hospital systems that promised to continue the Catholic healthcare mission at the respective facilities.
Three-hospital Excela Health, a fledging system based in Greensburg, agreed to purchase the assets of 149-bed Mercy Jeannette (Pa.) Hospital for approximately $16 million, marking the second time in four years that Mercy Jeannette will change hands. Meanwhile, the Vatican gave its blessing to the long-anticipated merger of the University of Pittsburgh Medical Center system and Mercy Jeannettes sister hospital, 441-bed Mercy Hospital of Pittsburgh. Vatican approval represented the final step toward completion of the deal, which is now expected to close on Dec. 31.
Mercy Jeannette, the former Jeannette (Pa.) District Memorial Hospital, became a subsidiary of Pittsburgh Mercy Health System and a member of Catholic Health East in 2003.
The two separate deals point to an increasing number of cases in which financially struggling Catholic hospitals are sold to non-Catholic hospitals or systems yet still remain Catholic, said Lois Uttley, director of the MergerWatch Project in New York, a healthcare advocacy organization that monitors hospital mergers involving religious and secular organizations. In 2004, MergerWatch identified at least 12 such deals involving Catholic and for-profit hospitals, she said.
Its disturbing to see Catholic health restrictions maintained after a Catholic hospital is sold to a nonsectarian system, because the community loses the opportunity to have a full range of reproductive and other health services offered at the hospital. It also places the nonsectarian system in the position of trying to interpret Catholic healthcare doctrine, Uttley said.
Formed from the merger of three competing Western Pennsylvania hospitals in 2004, Excela said it will purchase the assets of Mercy Jeannette from Catholic Health East and the Sisters of Charity of Seton Hillthe first step in a six-month approval process. The deal will legally close Mercy Jeannette, reincarnating it into a campus of Excela Health Westmoreland Hospital, Greensburg. The hospital will be renamed Excela Health Westmoreland Hospital at Jeannette, officials said. Excela officials pledged to respect the Catholic mission at Mercy Jeannette, which has been a Catholic hospital since its inception in 1959.
In addition to the asset purchase, Excela has agreed to invest approximately $10 million in capital in the facility over the next five years. The deal was driven by the need for a new strategic partner and direction for the hospital, officials said. They project Mercy Jeannette will lose $6.5 million on operations in 2007.
Excela will succeed where Catholic Health East failed because the system is locally based and understands the market, said David Gallatin, Excelas chief executive officer. It really fits our strategic plan, which calls for a distributed delivery model providing acute care throughout the service area, he said.
The idea, when Excela was first formed in 2004, was to replace the three hospitals295-bed Westmoreland, 100-bed Frick Hospital in Mount Pleasant and 157-bed Latrobe (Pa.) Area Hospitalwith a brand new hospital, Gallatin said. However, it soon became apparent that the communities did not support that, he said. In October, Excela regrouped and decided instead to invest in the existing communities we serve, he said.
First announced in September 2006, the UPMC-Mercy Pittsburgh deal will establish a fund of about $120 million to support the local community, according to officials.