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Pittsburgh Mercy Health System Signs Letter of Intent to Transfer Ownership of The Mercy Hospital of Pittsburgh to UPMC September 20, 2006 Pittsburgh, PA – The Pittsburgh Mercy Health System (PMHS) and its parent organization, Catholic Health East (CHE), announced today that they have signed a letter of intent to transfer ownership of The Mercy Hospital of Pittsburgh (Mercy Hospital) to the University of Pittsburgh Medical Center (UPMC). As outlined in the letter of intent, Mercy Hospital will continue as a Catholic hospital, with canonical oversight from the Diocese of Pittsburgh. UPMC will operate Mercy as an acute care hospital making necessary capital investments to maintain and enhance the institution's clinical excellence, while preserving this important health care resource for the community it has served for nearly 160 years. By agreement with the Diocese, the hospital's name will change to UPMC Mercy. "This announcement can only be greeted with enthusiasm," said Bishop Paul J. Bradley, Administrator of the Diocese of Pittsburgh. "It means that the hospital will retain its Catholic identity and will continue to operate according to the ethical and religious directives established by the United States Conference of Catholic Bishops. At the same time, the Mercy Sisters will be able to maintain and expand so many of their programs vital to our community." The transaction, subject to further due diligence, negotiation of a definitive agreement and regulatory approvals, is limited to The Mercy Hospital of Pittsburgh and Mercy Primary Care - Mercy Hospital's employed physician practices. PMHS will continue to sponsor and operate Mercy Jeannette Hospital; Mercy Behavioral Health; the SmartHealth Outpatient Centers in Bethel Park, Delmont, North Huntingdon, and Penn Township; Mercy Senior Care: St. Pius X Residence; LIFE Pittsburgh; and the Pittsburgh Mercy Foundation. Mercy Hospital is a 428-bed, tertiary care teaching hospital founded in 1847 by the Sisters of Mercy. It was the first hospital in Pittsburgh and the first Mercy Hospital in the world. PMHS participates in CHE, a multi-hospital Catholic health system with facilities in eleven eastern states from Maine to Florida. PMHS is sponsored by the Regional Community of Pittsburgh, Sisters of Mercy of the Americas. "Mercy Hospital has a long and proud history of providing outstanding medical care to our community," said John R. McGinley Jr., Esq., chairperson of PMHS's Board of Trustees. "However, Mercy is located in a competitive area with a declining patient population base. Like most health care facilities, it faces an ever-increasing need for investment in new technology, facility improvements, and information systems." In the last three years, he explained, Mercy Hospital and Mercy Primary Care experienced operating losses totaling $42 million, with projections showing that the hospital cannot generate sufficient income to invest in the capital improvements needed for it to remain viable in the future. "The PMHS Board concluded that Mercy Hospital's situation was unsustainable," said Mr. McGinley. The decision to transfer ownership of Mercy Hospital came after a review of the hospital's financial performance, the region's health care market, and the health system's mission. "To ensure continuity of services in the low-income and vulnerable areas that Mercy Hospital serves, while advancing PMHS's mission, CHE and PMHS identified the transfer of the hospital to UPMC as the only viable option," said Mr. McGinley. "UPMC has a tradition of community stewardship. It has demonstrated a commitment to reinvestment in its facilities and programs, job creation, and the economic revitalization of the region. These factors were central to our decision about the disposition of this important charitable community asset," he said. In addition, Mr. McGinley noted, PMHS and UPMC have a long history of working together with a shared focus on critical health care needs. "The region has witnessed the adverse impact of the closure of other health care providers on patients, employees, physicians, and the community. We remain absolutely determined not to allow a similar thing to happen to Mercy Hospital. We believe that this transaction and UPMC's proven commitment to sustaining key community services will allow Mercy's mission to live on," said Mr. McGinley. The Sisters of Mercy, the PMHS board, and CHE evaluated multiple strategic options for the hospital, according to Robert Stanek, president and chief executive officer of CHE. "We wanted to find a way to keep the community 'whole' by ensuring ongoing access to this valuable, acute care hospital resource, staffed by talented and dedicated physicians and employees," he said. The group considered options ranging from dramatically downsizing the hospital by eliminating important but costly services, to changing the focus of the hospital, to preserving the hospital's services by seeking a possible new owner. The first two options were considered and ultimately rejected. Potential new owners were then identified and discussions ensued. "After studying our options, we determined that a transaction with UPMC was the only solution that achieved all of our objectives and represented an extension of our past successful collaborations with UPMC. At that point, the Sisters of Mercy, PMHS and CHE jointly approached officials at UPMC to determine their interest in pursuing this transaction," said Mr. Stanek. "While this is understandably a difficult and emotional decision for us, we determined that this was the best possible way to preserve the hospital as a community resource and to ensure the maintenance and enhancement of our mission-driven, community-based programs devoted to serving those who are poor and the elderly," said Sister Margaret Hannan, RSM, president of the Pittsburgh Regional Community of the Sisters of Mercy of the Americas. As a result of the transfer of ownership, the Pittsburgh Sisters of Mercy will administer a $120 million fund, which will remain in and support the local community. "Our mission of serving the community will not change; how we fulfill our mission will change," said Sister Margaret. "When the Sisters of Mercy came to Pittsburgh so many years ago, the greatest need was for an acute care hospital, and we proudly met that need. But the needs of the community have changed; the biggest unmet need in our community at this point in our history is for community-based services for the poor and the elderly. This transaction will enhance our ability to meet these needs, and allows us to begin a new and important chapter in our service to residents of the community." Robert J. Cindrich, chief legal counsel of UPMC, said, "UPMC will happily welcome Mercy Hospital and its employees into our health care system. With this transaction, UPMC, the Pittsburgh Sisters of Mercy, CHE, PMHS, and the Diocese of Pittsburgh have come together with the common goal of preserving Mercy Hospital as a Catholic institution in the local community. As a result of this transaction, jobs will be preserved; Mercy's care in the community it serves will be enhanced, and empty beds will be occupied by patients who come to UPMC from around the world. At the same time, it will allow us to avoid hundreds of millions of dollars in planned construction, which, in turn, is a prudent use of community resources." The parties will now enter intensive due diligence and further negotiations with the goal of transferring ownership by the end of this year. Mercy Hospital will continue to provide all existing services during the transition period.
About Pittsburgh Mercy Health System PMHS comprises The Mercy Hospital of Pittsburgh, Mercy Jeannette Hospital, Mercy Behavioral Health, the SmartHealth Outpatient Centers, Mercy Primary Care, Mercy Senior Care: St. Pius X Residence, LIFE Pittsburgh (a joint venture of PMHS and Lutheran Affiliated Services), and the Pittsburgh Mercy Foundation.
About UPMC Widely recognized for its innovations in patient care, research, technology and health care management, UPMC has transformed the economic landscape in western Pennsylvania. The region's largest employer, with 43,000 employees and nearly $6 billion in revenue, UPMC comprises 19 tertiary, specialty and community hospitals, 400 outpatient sites and doctors' offices, retirement and long-term care facilities, an insurance plan, and international ventures. Nearly 5,000 physicians are affiliated with UPMC, including more than 2,300 employed physicians.
About Catholic Health East The System includes 33 acute care hospitals, 4 long term acute care hospitals, 41 freestanding and hospital-based long term care facilities, 13 assisted living facilities, 5 continuing care retirement communities, 8 behavioral health and rehabilitation facilities, 32 home health/hospice agencies, and numerous ambulatory and community-based health services. Catholic Health East facilities employ approximately 43,000 full-time employees as partners in ministry.
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