PinnacleHealth System wasted little time after the Federal Trade Commission blocked its merger with Penn State Hershey Medical Center in 2016. Since then, the central Pennsylvania system has announced the acquisition of five hospitals, with a total of 720 beds. Now, it’s the target in another in-state merger deal.
Last March, the University of Pittsburgh Medical Center (UPMC) and PinnacleHealth signed a letter of intent to explore a merger. In mid-August, the parties announced they’d reached a definitive agreement on the deal.
PinnacleHealth operates seven acute-care hospitals mainly in central Pennsylvania, with a total of 1,267 licensed beds. When it began working with UPMC in March 2017, it only had three hospitals. It has since acquired four more from Community Health Systems (NYSE: CYH), for $231 million. Included in that deal, which closed on June 30, are Memorial Hospital (100 beds) in York; Lancaster Regional Medical Center (214 beds); Heart of Lancaster Regional Medical Center (148 beds) and Carlisle Regional Medical Center (165 beds).
PinnacleHealth has another merger pending, with Hanover HealthCare Plus, which it announced on July 24. Hanover Healthcare includes Hanover Hospital, a 93-bed acute care hospital, a physician network of more than 240 physicians and other facilities in Hanover, Pennsylvania.
The merger with UPMC will move UPMC into direct compeition with the University of Pennsylvania Health System (Penn Medicine), which owns Lancaster General Hospital, a 533-bed acute care hospital in Lancaster. Penn Medicine is the largest health system in southeastern Pennsylvania, with five hospitals, 10 multispecialty centers and additional services in the area.
It also affords a new service area for UPMC’s health insurance products, outside its core western Pennsylvania market, according to the Pittsburgh Post-Gazette. Those products contributed about half the system’s operating revenue of $12.8 billion for the 12 months ending June 30.
Lessons Learned from Failed Merger
PinnacleHealth presumably learned a few lessons after its failed merger with Penn State Hershey. That deal was officially announced on June 27, 2014, and would have created a new health system in central Pennsylvania, tentatively named Penn State Health. It would have combined PinnacleHealth’s three hospitals with the Penn State Milton S. Hershey Medical Center in Hershey, a 492-bed acute care hospital, as well as a cancer institute and Penn State Hershey Children’s Hospital.
On September 27, 2016, a federal judge in Pennsylvania granted an injunction against the integration of the two systems, and the merger was called off in October 2016.
The deal with UPMC can’t be contested on the same grounds, since UPMC’s 23 academic, community and specialty hospitals are located largely in western Pennsylvania, and one in Jamestown, New York.
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