The University of Pittsburgh Medical Center is poised to control more than half the hospital market in Allegheny County following today's deal giving it control of venerable Mercy Hospital, the city's first permanent hospital and the region's largest Catholic medical center.
While UPMC and Mercy officials expressed confidence that the proposed merger would pass regulatory review, competitors immediately questioned the further growth of the Oakland-based behemoth. UPMC already operates 17 hospitals in Western Pennsylvania and is the region's largest private employer with more than 40,000 employees.
"We remain concerned that this latest acquisition of a hospital by UPMC is yet another elimination of that choice in the market and reflects a further attempt by UPMC to establish a health care monopoly in the area," said Tom Chakurda, spokesman for the West Penn Allegheny Health System.
UPMC and Mercy officials were careful to describe the transaction as a merger, not a sale. The parties said their letter of intent would transfer ownership of Mercy Hospital and a network of employed physician practices from Conshohocken, Pa.-based Catholic Health East to UPMC, and that Mercy would continue as a Catholic hospital, with canonical oversight from the Diocese of Pittsburgh.
The agreement includes a $100 million contribution by UPMC to a foundation operated by the Sisters of Mercy, who created the hospital in 1847, the first of many Mercy hospitals founded across the country. The Sisters of Mercy would continue to operate Mercy Jeanette Hospital in Westmoreland County, as well as Mercy Behavioral Health, four certain outpatient centers and three senior care facilities.
John R. McGinley Jr., chairperson of the board at the Pittsburgh Mercy Health System, said the decision to transfer ownership followed a review of the hospital's financial performance as well as the region's health care market.
In the past three years, Mercy Hospital and Mercy Primary Care lost more than $42 million on operations, he said. Mercy suffered from tough competition by the larger UPMC and West Penn Allegheny systems -- a costly dynamic that involves not just patients but the physicians who treat them. As an example, Mr. McGinley noted that Mercy paid a high price earlier this year to recruit anesthesiologists as doctors shifted allegiances among local hospitals.
In the end, Mercy was unable to finance needed capital improvements such as an emergency room renovation, and improvements for operating rooms and intensive care units.
As Ken Eshak, the hospital president, wrote in a message distributed to physicians yesterday morning: "Mercy Hospital requires significant capital investments ($60 million) in new technology and facility improvements, and our financial projections indicate that Mercy will not generate enough income in the future to make these major investments."
Spokesmen said no jobs would be lost through the acquisition.
More details in tomorrow's Pittsburgh Post-Gazette.
First Published: September 20, 2006, 4:00 a.m.
