Excela Health and Butler Health System have signed a letter of intent to create a new health system, potentially forming a third medical giant in Western Pennsylvania.
The size of the new system, which will generate over $1 billion in revenue, will be big enough to “accelerate and elevate its relevancy and essentiality in the region’s highly competitive health care marketplace,” according to a news release announcing the merger Wednesday.
Leadership of the new system and other details will be released as definitive merger documents are completed.
“The new system will provide additional services and better access to those services,” BHS President and CEO Ken DeFurio said in a statement. John Sphon, president and CEO of Excela Health, said the partnership would “extend our intellectual and financial capital.”
BHS operates hospitals in Butler and Clarion; Excela has three hospitals in Westmoreland County. Both health systems operate Western Pennsylvania’s so-called bridge hospitals, which feed a steady stream of patients to the big urban hospitals in Pittsburgh for advanced care.
The creation of the new health system would leave Heritage Valley, Washington and St. Clair health systems as the remaining bridge institutions.
Based on revenue, the new system will be the third-biggest in Western Pennsylvania, behind UPMC, owner of 40 hospitals, and Highmark Health’s Allegheny Health Network, which operates 14 hospitals, including four mini-hospitals in the Pittsburgh area.
The announcement also comes during a rough patch financially for health systems nationwide.
BHS reported an operating income loss of $8.2 million for the three months ending March 31, widening the $6.7 million loss it registered for the same period in 2021. Excela reported a loss from core operations of $10.5 million for the nine months ending March 31, a massive decrease of around $40 million from the same period a year ago, when the company actually reported a gain of $29.8 million.
For Excela, the tie-up follows a failed effort to acquire Monongahela Valley Hospital in Washington County last year. Clearfield County-based Penn Highlands Healthcare ultimately took control of the 200-bed Mon Valley Hospital in October.
The Excela-BHS merger would give Excela the heft to take on WVU Medicine and Penn Highlands in Fayette County — Excela’s backyard — where it has long had medical offices and plans for a $12 million medical complex this year. The merger could also give Excela the muscle to push back against Allegheny Health Network, which opened a 10-bed hospital two miles from Excela’s flagship Westmoreland hospital in 2020.
Morgantown-based WVU Medicine owns Uniontown Hospital, which is located in Uniontown, 11 miles from Connellsville, and Penn Highlands owns the 64-bed former Highlands Hospital in Connellsville, which has suddenly become ground zero for hospital competition among medical providers.
Reflecting the competition in recent months are the recently completed electronic billboards in the Connellsville area for WVU Medicine primary care physician Gina Canada, a Connellsville High School graduate, who has treated Fayette County patients for more than a decade. In January, WVU Medicine recruited Dr. Canada from Excela Health.
This story was updated at 5:42 p.m. June 1, 2022.
Kris B. Mamula: kmamula@post-gazette.com or 412-263-1699.
First Published: June 1, 2022, 3:14 p.m.
Updated: June 1, 2022, 6:03 p.m.
