PinnacleHealth proposes major shakeup: buying 4 hospitals, affiliating with UPMC

(Harrisburg) — A major health system in the midstate is proposing two significant moves that would reshape health care in the region for decades to come.

Harrisburg-based PinnacleHealth says it has reached an agreement to purchase four midstate hospitals: Carlisle Regional Medical Center, Heart of Lancaster Regional Medical Center, Lancaster Regional Medical Center, and Memorial Hospital of York.

All four hospitals are owned by the for-profit Community Health Systems. In recent months, it has shed multiple hospitals as it has faced financial pressures.

In a statement, PinnacleHealth’s CEO Philip W. Guarneschelli said “We are excited to bring these quality hospitals, their employees and physicians into the PinnacleHealth family. Together we will build on and strengthen their history of quality and success, and we look forward to continuing strong, collaborative relationships with employed and partnering physicians.”

The deal still needs to be okayed by regulators, who already successfully blocked a proposed merger between PinnacleHealth and Penn State Health in a bruising court fight that stretched over years and likely cost millions in legal fees.

Pinnacle says it expects the purchase to be approved by the summer.

The terms of the deal were not disclosed.

Affiliation proposed

In a separate announcement, Pinnacle also says it’s signed a letter of intent to work towards an affiliation with the University of Pittsburgh Medical Center, also known as UPMC.

UPMC is one of the largest health systems in Pennsylvania, and it’s been locked in a battle with the health insurance company Highmark in the Pittsburgh market.

But it’s also shown interest in expanding into central Pennsylvania, and this move, if approved by regulators, would give it a major presence in a region where competition among health systems has intensified in recent years.

If an affiliation agreement is reached with UPMC, PinnacleHealth would be better positioned to compete with Penn State Health, which has historically drawn patients from across central Pennsylvania for complex treatments that can net significant revenue.

UPMC also operates an insurance plan that has become increasingly competitive in Pennsylvania.

Pinnacle’s Guarneschelli said in a statement, “Affiliation supports geographic expansion and introduces more choices for health insurance through a provider-sponsored health plan.”

Pinnacle says it has started discussions with UPMC, but there will be no immediate impact.

These moves follow the abrupt departure of PinnacleHealth’s CEO Michael Young, whose resignation was announced on March 2nd, the same day it took effect.

Young led Pinnacle while it worked to merge with Penn State Health, even going to federal court to try to fight attempts by regulators to stop it.

Late last year, a federal appeals court ruled against the proposed merger, citing the likelihood of higher costs for patients. Young later called the decision “a shame”.

What this means for patients

Nothing will change immediately.

Regulators, from both the Federal Trade Commission and state Attorney General’s office, will surely scrutinize both of the announcements from Pinnacle, as they did when it proposed a merger with Penn State Health.

Neither immediately responded to a request for comment.

Study after study after study have shown that hospital consolidation leads to a higher-than-normal increase in prices over time, but hospital administrators often argue that purchases or mergers create efficiencies that push down the price of health care.

In what some might view as an attempt to push back against independent research, the American Hospital Association recently paid for a study that showed that hospital mergers reduce administrative costs.

Regulators could challenge Pinnacle’s proposed purchase of four other midstate hospitals. It isn’t immediately clear if they have the power to block affiliations.