UPMC is pursuing an affiliation with Harrisburg-based PinnacleHealth System, the biggest deal of its kind for the Pittsburgh health system and one that could give it control over at least seven hospitals in central Pennsylvania.
UPMC agreed to buy PinnacleHealth on Tuesday, the same day PinnacleHealth announced it was buying four hospitals from for-profit chain Community Health Systems: Carlisle Regional Medical Center in Carlisle; Lancaster Regional Medical Center in Lancaster; Heart of Lancaster Regional Medical Center in Lititz; and Memorial Hospital in York.
Terms of the sale, which is subject to regulatory approval, were not disclosed. In its past acquisitions, UPMC has purchased single hospitals.
PinnacleHealth already operates three hospitals: PinnacleHealth Harrisburg Hospital and PinnacleHealth Community General Osteopathic Hospital, both in in Harrisburg; and PinnacleHealth West Shore Hospital in Mechanicsburg.
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The health system is also affiliated with J.C. Blair Health System Inc. in Huntingdon, but it was unclear whether that 62-bed hospital was part of the transaction.
PinnacleHealth spokeswoman Kelly McCall declined to comment.
In a prepared statement, PinnacleHealth said the UPMC deal comes as PinnacleHealth had been exploring relationships with compatible organizations. The deal comes less than two weeks after the resignation of PinnacleHealth’s president and CEO, Michael Young, who was unsuccessful in an attempt to merge the system last year with Penn State Health Milton S. Hershey Medical Center.
Consolidation has been a trend among hospitals for several years as smaller institutions try to link up with larger ones to better recruit doctors and improve access to capital.
Regulators have been closely monitoring such deals, slowing UPMC’s acquisition of Jameson Hospital in New Castle last year and opposing the PinnacleHealth-Penn State Hershey deal.
“We are pleased about PinnacleHealth’s shared vision to expand evidence-based world class health care with value driven, low-cost insurance products to benefit more residents and businesses throughout Pennsylvania,” UPMC president and CEO Jeffrey Romoff said in a prepared statement.
The affiliation was an “exciting opportunity for the system and central Pennsylvania,” said PinnacleHealth’s new president and CEO, Philip Guarneschelli.
If consummated, the deal would give UPMC an entry into a health insurance market now dominated by Blue Cross Blue Shield plans, but the additional hospitals and doctors would create a ready network of health care providers for UPMC Health Plan products.
Without the hospitals, UPMC would be forced to contract with doctors and other health care professionals through a third party, increasing costs, which could make UPMC products less competitive.
The Pittsburgh health system’s insurance line has been growing rapidly. For the six months ending Dec. 31, UPMC insurance enrollment revenue generated $3.1 billion, about 46 percent of the system’s $6.8 billion in operating revenue for the period, and up 9 percent from the same period in 2105.
UPMC Health Plan has more than 3 million members, with enrollment growing steadily since the start of the plan in 1998. The health plan also controls 58 percent of the government exchange market, with 95,916 members in the 29 counties of Western Pennsylvania.
Date: March 17, 2017