Merger of Excela, Butler health systems to be finalized by year's end, officials say

Excela Health and Butler Health System completed another step toward becoming one by entering into a definitive merger agreement, moving forward with a plan expected to generate more than $1 billion in revenue.

The two networks signed a letter of intent to merge on June 1. The agreement announced Friday means they will move ahead with the state and federal regulatory approvals, which are expected to be completed by the end of the year.

When combined, the system is expected to employ 7,300 people and have more than 1,000 physicians and practitioners to serve about 750,000 people in Butler, Clarion and Westmoreland counties.

“This is a very important development for our respective organizations and the proposed new system. We are now one step closer in realizing a goal that will have a dramatic and positive impact on health care for those we serve,” said John Sphon, Excela Health CEO, in a statement.

Sphon expects the merger will add resources to both regions and help to attract new staff members.

“If you look at each of our organizations individually, we felt that we were better together than apart,” he said. “We think that being together will help us attract additional physicians in additional areas.”

Butler Health System President and CEO Ken DeFurio called it “a major step forward in the process to redefine locally controlled, community-based care,” in a statement.

“Our commitment to our patients in providing high-quality, low-cost sophisticated care in our region will be the cornerstone of the new entity,” DeFurio said.

An expanding network

The yet-to-be-named health system would bring together Excela’s three locations — Frick Hospital in Mt. Pleasant, Latrobe Hospital in Latrobe and its flagship Westmoreland Hospital in Greensburg — with the two Butler Health System hospitals — Butler Memorial Hospital in Butler and Clarion Hospital in Monroe Township, Clarion County.

With about 4,800 employees, Excela is the top private employer in the county — more than double United Parcel Service’s 1,500 workers and Polyconcept North America’s 1,200 employees, according to the county’s website.

Butler Health System has more than 70 outpatient locations, employs 3,000 people and includes 270 providers, making it the largest employer in Butler County and the largest health care employer in Clarion County.

Paul Bacharach and Tim Morgus, the board chairs of Excela and Butler respectively, issued this joint statement: “Our boards approached the merger as an opportunity to affect real and meaningful change in the landscape of health care in western Pennsylvania. We are most excited regarding the possibilities that are now before us.”

Sphon emphasized that the merger is not a situation of one organization acquiring another.

“We think it’s important that the merger is where we brought both of the organizations together,” he said. “There’s no money being exchanged and no purchasing of a system.”

Merger movement

Hospital mergers and the creation of health systems have both become more common over the past decade, said Liam Migdail, spokesman for the Hospital and Healthsystem Association of Pennsylvania. Most hospitals in Pennsylvania — 85% as of this year — are part of health systems. Only 15% are independent.

“For hospitals to be able to continue to meet the needs of their communities, they need financial sustainability, which is very much at risk for many hospitals throughout the state and nationally,” Migdail said. “Forming or joining health systems enables hospitals to take advantage of economies of scale and ease the burden of systemic challenges and risks that cause financial strain.”

Mergers can bring with them flexibility, quality and safety improvements, as well as coordination of health care services and specialists throughout the system, he said. For rural hospitals, mergers can sometimes offer a greater range of services and initiatives and allow for technology and infrastructure improvements.

“Rural hospitals often face greater financial stress as they typically experience fluctuating patient volumes, more challenges hiring health care professionals, and a greater share of patients covered by Medicare and Medicaid, which pay below the cost of care and haven’t kept pace with rising expenses,” he said. “Specifically for rural areas, mergers are one way hospitals have been able to maintain access to health care in their communities.”

Related:

• Excela, Butler health systems announce merger, creating region's 3rd hospital giant

• Excela Health's proposed merger with Butler likely a bulwark against competitors, experts say

• Latrobe-area leaders upbeat about proposed merger of Excela, Butler health systems

• Mt. Pleasant-area locals wonder how Excela, Butler intended merger will impact Frick Hospital