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Children's Institute of Pittsburgh to close rehab hospital

| Tuesday, March 13, 2018, 4:54 p.m.
The Children's Institute of Pittsburgh is closing its inpatient rehabilitation hospital.
Nate Smallwood | Tribune-Review
The Children's Institute of Pittsburgh is closing its inpatient rehabilitation hospital.
Wendy Ann Pardee, CEO of The Children's Institute of Pittsburgh.
Wendy Ann Pardee, CEO of The Children's Institute of Pittsburgh.

The Children's Institute of Pittsburgh announced Tuesday it is closing its 62-bed rehabilitation hospital in Pittsburgh's Squirrel Hill neighborhood.

“For years, we have seen negative trends in our inpatient census and revenue while our operating costs have continued to rise,” the Children's Institute said in a written statement. “Ultimately, it became clear this was the right path for our organization to remain strong for the future.”

The institute told the Tribune-Review it plans to cut about 15 percent of its workforce.

“It's been a tough day,” Children's Institute CEO Wendy Ann Pardee said by phone late Tuesday. “We have a very close sense of family and sense of community here, so obviously it's been difficult.”

Pardee said she expects the hospital's 19 remaining patients to be discharged by mid-April.

“We are blessed to be living in a region that has robust health care services. We have UPMC. We have (Allegheny Health Network). We do not foresee there being parents or children having to go without services,” Pardee said. “Other providers are already serving those children and will be bringing up (their) capacity.”

The organization reported on audited financial statements more than $8.6 million in operational losses in its fiscal year ending June 30, 2017. That compares to $8.3 million in operational losses in 2015-16 and $5.6 million in operational losses in 2014-15, according to Pardee.

“This is not atypical; other providers similar to us are experiencing this across the nation,” said Pardee, who succeeded former CEO David Miles in August. “Children are safer today than they have been ... and also there's a trend toward providers offering the full range of services to patients and not referring out for specialty services.”

Other services will continue

In addition to the hospital, the Children's Institute runs a state-funded private school, The Day School, for about 200 children with special needs from more than 65 school districts. It also has an adoption and foster care center, Project Star, serving families in Allegheny, Beaver, Washington and Westmoreland counties.

Outpatient therapy, including nutrition support, occupational therapy, behavioral health, physical therapy and speech therapy will continue.

“While this was a difficult decision to make, we are energized by the possibilities that exist to more fully invest in and expand our outpatient health care services, The Day School and Project STAR,” the institute's statement said. “We are committed to these services, and there are very few organizations across the country that meet the combination of needs that these programs serve.”

The Day School has 29 classrooms dedicated to children who have multiple disabilities, including autism, and young adults transitioning to adulthood.

The institute on Shady Avenue was established in 1902 and employs more than 600 full- and part-​time workers on an operating budget of about $48 million.

Since mid-2016, the institute's board had been searching for a potential merger partner as revenue to its hospital dwindled.

A decade ago, the hospital averaged a daily intake of about 40 patients, compared to 19 in recent years, according to Pardee.

“It was important for us to find the right partner at the right time, someone who had a like mission and shared values with our organization and someone who would be able to compete at the level that would be required,” Pardee said. “We did have conversations with different parties but just could not find that ideal suitor.”

News of the rehabilitation hospital closure caught competitor and collaborator Pamela Schanwald, CEO of the Children's Home of Pittsburgh & Lemieux Family Center, by surprise. The Children's Home of Pittsburgh & Lemieux Family Center, which is in Pittsburgh's Friendship neighborhood, has a 30-​bed pediatric specialty hospital.

“Obviously it's a shame to see an organization with a long and rich history of providing fabulous rehab services to the pediatric population close its hospital,” she told the Tribune-Review. “The Children's Home will work to fill any gaps and services, working alongside West Penn Hospital and Children's Hospital of Pittsburgh of UPMC.”

Children's Hospital of Pittsburgh — the institute's primary source of referrals — declined to comment through spokesman Marc Lukasiak.

Internal Revenue Service records show the nonprofit organization as a whole took a $2.6 million net loss between July 1, 2015, and June 30, 2016, amid rising pension and investment costs. In 2014-15, the institute reported a net loss of $707,000.

The nonprofit retained about $102 million in net assets as of mid-2016, down from $124 million in mid-2015, IRS records show.

Ben Schmitt and Natasha Lindstrom are Tribune-Review staff writers. Reach Schmitt at 412-320-7991, or via Twitter at @Bencschmitt. Reach Lindstrom at 412-380-8514, or via Twitter @NewsNatasha.

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