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Format: 04/18/2014
Format: 04/18/2014

News

Pittsburgh Business Times: West Penn, doctors group in partnership talks

Friday, December 18th, 2009

By Kris B. Mamula 

 

West Penn Allegheny Health System is in exclusive discussions with the region’s biggest independent doctors’ group about a partnership after aggressive efforts by the University of Pittsburgh Medical Center to buy the practice foundered earlier this year.

 

At stake in the talks is the future of West Penn Allegheny’s 317-bed Forbes Campus Hospital in Monroeville, which receives up to 40 percent of its patient admissions from Premier Medical Associates’ doctors, according to two physicians and others familiar with the situation, but who asked not to be publicly identified because of the sensitivity of the negotiations.

West Penn Allegheny reached a so-called standstill agreement with Premier in October, which gives the region’s second-largest hospital network a year to come to terms with the physicians’ practice or again risk losing it to UPMC.

Cash-strapped West Penn Allegheny, which reported an operating loss of $4.1 million during the three-month period ending Sept. 30, is not in a position to buy Premier, which employs 55 doctors and has 15 offices with a free-standing imaging center in Monroeville.

Since October, the two sides have explored cooperative agreements, including a jointly operated ambulatory surgery center and the possibility of integrating 45 doctors from West Penn Allegheny into Premier, creating a physician’s group that’s better able to counter UPMC’s growing presence in the Monroeville area, according to one of the doctors familiar with the discussions.

“We’re in talks with Premier and we value the relationship with them, which we hope to continue,” said West Penn Allegheny spokesman Dan Laurent, who declined to elaborate. Premier officials and UPMC spokesman Paul Wood declined to comment.

But Michael Cassidy, a lawyer who specializes in such transactions but is not involved in the Premier-West Penn Allegheny talks, said the deal represents a struggle over market share in Pittsburgh’s flourishing eastern suburbs.

“This is a market position strategy for both UPMC and West Penn,” said Cassidy, who works for the Downtown firm of Tucker Arensberg P.C. “The real threat is the loss of the market, which would be a considerable threat to West Penn. It would be a huge deal.”

Because of its size, Premier has been an attractive acquisition target for several years, Cassidy said. At various times, both hospital systems have been in talks with Premier.

Compensation for standstill agreements, like the one between West Penn Allegheny and Premier, is routine, experts say, but it isn’t known how much Premier received from UPMC or West Penn Allegheny as part of the recent talks.

One of West Penn Allegheny’s advantages in negotiations is the highly successful contract reached with Premier in 2007 to provide hospitalist coverage at Forbes Hospital — a first of its kind in the region. Premier employs 11 doctors to care exclusively for hospitalized patients, freeing the group’s primary care doctors to increase office visits and revenue while shrinking the average hospital stay by a half day, Premier CEO Mark DeRubeis said in an interview last month.

Shorter hospital stays boost revenue because insurers generally pay a flat rate for hospitalizations, regardless of the length of stay. West Penn Allegheny’s contract with Premier expires next year.

On the other side, UPMC’s big attraction to Premier is the $250 million hospital the health care giant is building in Monroeville, which will attract patients and other doctors, according to Cassidy. A doctor familiar with the talks also said Premier’s older physicians, comprising roughly half of the practice, are drawn to the security of working for UPMC at a time in their careers when they want to dial back the costs and hassles of private practice. With its deep pockets, UPMC is also in a position to make life uncomfortable for private practice physicians who spurn UPMC advances by setting up competing practices nearby, Cassidy said.

 

 

kmamula@bizjournals.com | (412) 208-3825

 

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