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Hospital executives from Greensburg-based Excela Health and Butler Health System in Butler continue to mull a name for the Pittsburgh region’s newest health system, three months after the deal was inked. But picking a name is not its biggest worry: Money woes, declining patient admissions and smothering competition from Pittsburgh’s two health care Goliaths are the more urgent issues at hand.
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Next up for Butler-Excela merger: Picking a name

Butler Health System

Next up for Butler-Excela merger: Picking a name

Hospital executives continue to mull a name for the Pittsburgh region’s newest health system, three months after the deal was inked, as the five-hospital merger wobbles into its first year.

But picking a name for the system created by the merger of Greensburg-based Excela Health and Butler Health System in Butler is not its biggest worry: Money woes, declining patient admissions and smothering competition from Pittsburgh’s two health care Goliaths — Allegheny Health Network and UPMC — are the more urgent issues at hand.

Whether the merger yields benefits, something Excela management says is already happening, may hinge on factors that don’t show up on a balance sheet, according to Colin G. McCulloch, partner at the Washington D.C. law firm of Epstein Becker Green, who was not involved in the transaction.

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The Excela-Butler merger “looks more like a marriage of equals,” he said, “where success depends on the intangibles, the things you can’t measure with a calculator: How well do the boards get along? Does the leadership share the same culture? Do the medical staffs respect each other? You really need that chemistry.”

A name for the new system will be released in a few weeks, CFO Tom Albanesi said in a prepared statement.

“This preparation takes time and diligence to be properly launched,” he said. “We are already functioning as a unified health system.”

In the meantime, the new system has other headaches.

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Combined admissions and observation patients fell 7.2% to 6,883 at Butler and 7.6% to 12,183 at Excela for the six months ending Dec. 31. Fewer patients helped drive operating losses at Butler to $23 million on operating revenue of $226.7 million, and a $15.3 million operating loss at Excela on operating revenue of $324 million for the six months.

Butler’s losses also breached a Truist Bank loan covenant on a $20 million note that had a $15 million balance. Mr. Albanesi said negotiations with the bank were continuing, but Epstein Becker Green attorney Mr. McCulloch said the bank would have little to gain from penalizing Butler for the breach because of the system’s fragile finances.

Mr. Albanesi said a decline in the number of COVID-19 patients had curbed hospital admissions.

Hospital systems often merge to reach new patients, but it’s unclear whether that will be possible for the new Butler-Excela system because its combined service area is already walled in by Pittsburgh’s competing health care Goliaths, AHN and UPMC, both of which offer health insurance coverage the new merged system must accept to survive.

AHN began drawing patients away from Butler in 2019 with the opening of a 34,000-square-foot cancer treatment center a few miles from Butler Memorial Hospital, while UPMC has flooded Butler County with seven outpatient rehabilitation clinics and an urgent care center for children.

Things aren’t much easier in Westmoreland County where Excela is located, and where AHN opened a mini-hospital and cancer care center in 2019 just a few miles from Excela’s flagship Westmoreland Hospital.

AHN also has primary care offices in Greensburg and Hempfield.

UPMC has targeted Westmoreland County with an urgent care center and primary care offices in North Huntingdon and Irwin and pediatric doctor offices in Mount Pleasant, Greensburg and North Huntingdon, all aiming to draw patients away from Excela.

Opening AHN medical offices closer to where people live is increasing the number of patients treated by the system, said David Holmberg, Highmark Health’s president and CEO. Patients have also warmed to the addition of specialty care in their communities.

“Moving assets closer to where they live — this reflects decades of investments,” he said. “People are choosing and taking their families where they think they have the best options.”

Whether the new Butler-Excela defies the challenges to become successful depends on how quickly each organization can adopt a shared identity, according to Brad Dennis, partner at Chicago office of McDermott Will & Emery, who was not involved with the deal.

“In a merger of equals, maintaining very distinct identities hurts the long term success rate,” Mr. Dennis said. “When people come together, they always want to maintain separate identities. When you start maintaining two of everything, you lose the efficiencies that typically come with combination. As quickly as possible, you want to move away from those historic identities.”

Kris B. Mamula: kmamula@post-gazette.com 

First Published: April 6, 2023, 10:00 a.m.
Updated: April 6, 2023, 5:41 p.m.

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Hospital executives from Greensburg-based Excela Health and Butler Health System in Butler continue to mull a name for the Pittsburgh region’s newest health system, three months after the deal was inked. But picking a name is not its biggest worry: Money woes, declining patient admissions and smothering competition from Pittsburgh’s two health care Goliaths are the more urgent issues at hand.  (Butler Health System)
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