UPMC moves ahead on purchase of PinnacleHealth


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Dive Brief:

  • UPMC have reached a definitive agreement to with Harrisburg-based PinnacleHealth to be acquired, Philly.com reports.
  • The deal paves the way for UPMC to expand its market share in central Pennsylvania and compete directly with the University of Pennsylvania Health System, which owns Lancaster General Health.
  • Last month, Pinnacle bought four central Pennsylvania hospitals from Community Health Systems, a Tennessee-based hospital chain. The purchase included Lancaster Regional Medical Center and Heart of Lancaster Regional Medical Center.

Dive Insight:

The deal, first announced in March, is UPMC’s largest ever and the first to involve an entire health system. Previous purchases have involved single hospitals, the most recent being Sunbury Community Hospital and Lock Haven Hospital from Quorum Health. Those hospitals will become part of Williamsport, Pa.-based UPMC Susquehanna, which was added to the UPMC system last fall.

With Pinnacle’s acquisition now on track, UPMC also stands to boost its health insurance product line, which accounted for close to half of its 2016 operating revenue. The move will pit UPMC Health Plan against Capital BlueCross and Highmark, which together have 75% of the central Pennsylvania market. Aetna holds the rest.

Gaining a foothold in the Harrisburg region could help to compete with Highmark, which four years ago bought Pittsburgh-based Allegheny Health Network, putting it in direct competition with UPMC’s medical and coverage operations.

Merger and acquisition activity has kept up a steady pace this year, with no signs of abating. Reasons for deals include declining admissions, rising costs and a desire to expand into new regions or service lines.

In May, Cleveland Clinic and Dover, Ohio-based Union Hospital signed a letter of intent to merge Union into Cleveland Clinic. The move will expand Cleveland Clinic’s footprint into southern Ohio, while bringing new services and resources to Union, officials said at the time.

Cleveland Clinic CEO Toby Cosgrove, who is stepping down later this year, said in April that consolidation and a greater focus on telemedicine would help providers transition from volume to value payment as healthcare reform continues to evolve.

UPMC expects to complete the acquisition September 1, pending regulatory approvals. For the fiscal year ended June 30, 2016, Pinnacle reported revenue of $1.05 billion.

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