Pennsylvania’s hospital systems agree to a merger

Two organizations agreed to create an organization with five hospitals. They hope to receive regulatory approval by the end of the year.

Two Pennsylvania health care systems say they have reached an agreement to merge and form a new organization with five hospitals and revenues of more than $1 billion.

Excela Health and Butler Health System, two systems in western Pennsylvania, announced Nov. 18 that they have reached a “definitive agreement” to join forces to create a new system.

The systems said they are in the process of obtaining approvals from federal and state agencies, which they believe would happen by the end of the year. Excela and Butler said in June that they had signed a letter of intent to merge the organizations.

Excela operates three hospitals: Excela Westmoreland Hospital, Excela Latrobe Hospital and Excela Frick Hospital. Butler operates two hospitals: Butler Memorial Hospital and Clarion Hospital.

“This is a very important development for our respective organizations and the proposed new system,” Excela Health CEO John Sphon said in a statement. “We are now one step closer to realizing a goal that will have a dramatic and positive impact on the healthcare of those we serve.”

Similarly, Ken DeFurio, president and CEO of Butler Health System, said in a statement that the merger agreement “represents a major step forward in the process of redefining locally controlled, community-based care.”

“Our commitment to our patients in providing quality, affordable, and quality care in our region will be the cornerstone of the new entity,” said DeFurio.

The new organization would employ around 7,300 people, including 1,000 physicians and practitioners, and serve a population of around 750,000 people. Much of the new organization’s service area includes the Pittsburgh suburbs.

While the systems have agreed to join forces, they have yet to announce a name for the new organization. A name will be announced at a later date, the systems said.

The systems compete with UPMC and Allegheny Health Network in the western Pennsylvania market.

Said Sphon The Tribune Review that he did not anticipate any changes in staffing or insurance offerings. Patients can continue to see their GPs and specialists. He said the merger will allow the systems to expand their offerings and reach.

“Both organizations independently offer very high-quality care. If we join forces, we will be able to improve on this,” Sphon said The Tribune Review.

Paul Bacharach, CEO of Excela, and Tim Morgus, CEO of Butler, issued a joint statement expressing their excitement about the proposed merger.

“Our directors viewed the merger as an opportunity to bring about real and meaningful change in the Western Pennsylvania healthcare landscape. We are very excited about the opportunities that now lie ahead of us,” said the Chairmen.

While the COVID-19 pandemic has generally slowed hospital mergers and acquisitions, the pace of deals appears to be picking up somewhat.

Across the state line from Pennsylvania, two West Virginia health care systems completed a merger in September. Charleston Area Medical Center and Mon Health have merged to form a new organization called Vandalia Health.

Essentia Health and the Marshfield Clinic Health System announced last month that they had signed a memorandum of understanding to explore the possibility of creating a regional health system. If they proceed, the merged system would include 25 hospitals.

LCMC Health announced in October that it had closed a deal to purchase three hospitals in the New Orleans area from HCA Healthcare. Yale New Haven Health System announced that it has reached an agreement to purchase two Connecticut health systems, including three hospitals, from Prospect Medical Holdings.

Industry analysts have said they expect more hospital mergers and acquisitions in the near future. With the financial difficulties many hospitals are facing after more than two years of the pandemic, some healthcare systems and providers may need to find partners to keep operations running, analysts said.

In addition, some healthcare systems may also seek agreements with other partners to complement them in areas such as telemedicine or outpatient services, industry analysts say.