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Allegheny Health Network plans major $700 million expansion

Ben Schmitt
| Wednesday, Oct. 18, 2017, 10:33 a.m.
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
Allegheny Health Network
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
David Stillwell, chief operating officer of Emerus (third from left), along with David Holmberg, chief executive officer of Highmark Health (far left) and Deborah Rice-Johnson, president of Highmark Health Plans (far right) listen as Cynthia Hundorfean, chief executive officer and president of Allegheny Health Network, speaks during a press conference announcing Highmark Health and Allegheny Health Network's plans for a $700 million expansion that includes the construction of four new neighborhood hospitals and the renovation of existing facilities in the area at Highmark's Fifth Avenue Place headquarters Wednesday, Oct. 18, 2017.
Kristina Serafini | Tribune-Review
David Stillwell, chief operating officer of Emerus (third from left), along with David Holmberg, chief executive officer of Highmark Health (far left) and Deborah Rice-Johnson, president of Highmark Health Plans (far right) listen as Cynthia Hundorfean, chief executive officer and president of Allegheny Health Network, speaks during a press conference announcing Highmark Health and Allegheny Health Network's plans for a $700 million expansion that includes the construction of four new neighborhood hospitals and the renovation of existing facilities in the area at Highmark's Fifth Avenue Place headquarters Wednesday, Oct. 18, 2017.
“From our perspective, the region does have a lot of beds, we want to make sure that we have the right beds and they need to be in the right locations at the right time,” said Highmark President and CEO David Holmberg, (left) who appeared at a news conference with David Stillwell, chief operating officer of Emerus, and Cynthia Hundorfean, chief executive officer and president of Allegheny Health Network.
Kristina Serafini | Tribune-Review
“From our perspective, the region does have a lot of beds, we want to make sure that we have the right beds and they need to be in the right locations at the right time,” said Highmark President and CEO David Holmberg, (left) who appeared at a news conference with David Stillwell, chief operating officer of Emerus, and Cynthia Hundorfean, chief executive officer and president of Allegheny Health Network.
Highmark Executive Vice President Dan Onorato is reflected in a rendering of a new hospital to be constructed in Pine Township during a press conference announcing Highmark Health and Allegheny Health Network's plans for a $700 million expansion that includes the construction of four new neighborhood hospitals and the renovation of existing facilities in the area at Highmark's Fifth Avenue Place headquarters Wednesday, Oct. 18, 2017.
Kristina Serafini | Tribune-Review
Highmark Executive Vice President Dan Onorato is reflected in a rendering of a new hospital to be constructed in Pine Township during a press conference announcing Highmark Health and Allegheny Health Network's plans for a $700 million expansion that includes the construction of four new neighborhood hospitals and the renovation of existing facilities in the area at Highmark's Fifth Avenue Place headquarters Wednesday, Oct. 18, 2017.
A rendering of a new full-service hospital that Highmark Health and Allegheny Health Network announced will be built adjacent to its Wexford Health and Wellness Pavilion that opened in 2014.
Allegheny Health Network
A rendering of a new full-service hospital that Highmark Health and Allegheny Health Network announced will be built adjacent to its Wexford Health and Wellness Pavilion that opened in 2014.
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
Allegheny Health Network
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
Allegheny Health Network
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
Allegheny Health Network
A rendering showing what the four neighborhood hospitals would look like. The locations of the new hospitals has not been released.
A rendering showing what the four neighborhood hospitals proposed by Highmark Health and Allegheny Health Network would look like. The locations of the new hospitals have not been released.
Allegheny Health Network
A rendering showing what the four neighborhood hospitals proposed by Highmark Health and Allegheny Health Network would look like. The locations of the new hospitals have not been released.
A photo of an existing Emerus facility.
Allegheny Health Network
A photo of an existing Emerus facility.
A photo of an existing Emerus facility.
Allegheny Health Network
A photo of an existing Emerus facility.
A photo of an existing Emerus facility.
Allegheny Health Network
A photo of an existing Emerus facility.
A photo of an existing Emerus facility.
Allegheny Health Network
A photo of an existing Emerus facility.
Officials marked the opening of a new 23,000-square-foot Allegheny Health Network Outpatient Center in Hempfield on Tuesday July 18, 2017.
Christian Tyler Randolph | Tribune-Review
Officials marked the opening of a new 23,000-square-foot Allegheny Health Network Outpatient Center in Hempfield on Tuesday July 18, 2017.

Highmark Health and Allegheny Health Network announced Wednesday a massive $700 million expansion plan that includes construction of four neighborhood hospitals, a 160-bed state-of-the-art hospital in Pine and renovation of its existing facilities throughout Western Pennsylvania.

The region's second largest hospital network said the new full-service hospital will be adjacent to its Wexford Health and Wellness Pavilion that opened in 2014.

The four neighborhood hospitals will be created as part of a joint venture with for-profit Emerus with a goal of expanding access to emergency care, primary care and other specialty services, officials said. Locations have not been disclosed but officials project they will open in early 2019.

"From our perspective ,the region does have a lot of beds. We want to make sure that we have the right beds and they need to be in the right locations at the right time," David Holmberg, Highmark Health President and CEO, said during a Downtown Pittsburgh news conference. "And that's what this strategy does, it moves them closer to where the action is and where people are."

The health system had previously announced a $315 million capital investment to support its cancer strategy as well as its focus in the Erie market, bringing its most recent investment in patient care to more than $1 billion.

Officials said the new facilities will add 800 jobs to Western Pennsylvania's health care workforce. AHN employs about 17,000, while rival UPMC employs nearly 80,000.

On its website, Emerus describes itself as "the nation's first and largest operator of micro-hospitals." Its facilities typically range from 15,000 to 60,000 square feet and include an emergency department as well as 10 to 12 beds for observation and short stays.

"Hospitals and health systems across the country are seeking innovative solutions to providing patients and communities with not only better access to care, but a more efficient model of care delivery," Emerus CEO Craig Goguen said in a statement. Both AHN and Emerus will share the cost of building the new facilities.

Allegheny Health Network includes flagship Allegheny General Hospital on the North Side, West Penn Hospital in Bloomfield, Allegheny Valley Hospital in Natrona Heights, Forbes Hospital in Monroeville, Jefferson Medical Center in Jefferson Hills, St. Vincent Hospital in Erie and Canonsburg Hospital.

"Today's announcement further underscores the magnitude of our commitment to the region and to developing a nationally leading, value-based health care system that is unsurpassed in the quality, accessibility and affordability of the services it provides," Holmberg said. "Through our partnership with Emerus and the other significant capital investments planned for AHN, we are building a uniquely patient-centric health care system and taking every step necessary to ensure the network's exceptional care is more readily available to patients and our members in settings close to where they live and work."

Wednesday's announcement did not include details about Allegheny Valley Hospital in Harrison. However, Holmberg said AHN is committed to investing there as well.

"We will have announcements that will come in the relatively near future on what we're going to do there," he said. "There's a real need and a real opportunity."

Allegheny County Executive Rich Fitzgerald, who attended the news conference, said many longtime residents grew up with Allegheny General and West Penn hospitals.

"It wasn't that many years ago that the future of some of those facilities was in doubt," he said. "And now the future for those facilities for our neighborhoods and for our community is very bright for lots of reasons."

The move follows action by the Pennsylvania Insurance Department that gave Highmark greater flexibility in investing in the network. The insurer has invested more $1.4 billion in the system since 2013. By 2022, its total investment in the system will balloon to nearly $2.5 billion.

Officials have said the seven-hospital chain is in the midst of a financial upswing. It reported an operating gain of $13 million for the half-year, following a 2016 operating loss of $39 million.

The region's dominant health care network, UPMC, is expected to announce soon an expansion plan of its own. UPMC is looking to build a $200 million hospital in the South Hills, not far from where AHN operates Jefferson Medical Center. UPMC has not divulged details of its plan other than to say it is pursuing "significant strategic options."

UPMC officials declined comment on the AHN expansion.

In a sign that the UPMC-AHN battle is heating up, AHN said it plans to move forward with an expansion and renovation of Jefferson Hospital's emergency department. Officials said the hospital serves more than 45,000 patients in the South Hills every year. Work on the project will start in early 2018, officials said.

Ben Schmitt is a Tribune-Review staff writer. Reach him at 412-320-7991, bschmitt@tribweb.com or via Twitter at @Bencschmitt.

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