The Herald, Sharon, Pa.

April 4, 2014

The state of health care: Make a deal or else

By Michael Roknick
Herald Business Editor

NEW CASTLE — The health-care system is undergoing makeover surgery.

On the same day Sharon Regional Health System finalized its sale to Community Health System Inc., New Castle-based Jameson Health System said it was considering similar action.

Last week Grove City Medical Center in Pine Township said it will be closing its costly maternity unit this summer after it entered a partnership with UPMC. After July 1 patients who are expecting will deliver their babies at UPMC Horizon in Farrell or UPMC Northwest in Seneca.

Hospital sales, mergers and partnerships aren’t unique to western Pennsylvania. Hospital systems throughout the country are entering deals thought unimaginable five years ago.

Eroding profit margins and new mandatory regulations are squeezing hospitals as never before. The message in health care now is simple: Make a deal or face the consequences.

Among the reasons Doug Danko, Jameson’s CEO, cited for holding talks with other outfits is an upcoming mandate of the Affordable Care Act that health systems get elaborate medical information systems.

Such information systems aren’t simple $500-a-pop personal computers. Hospitals must be capable of sending, receiving, storing and cataloging everything from MRI and CT scanner photos and videos to ordering pharmaceutical goods. And that requires pricey and complex software and computers.

How costly?

Before reaching a deal with Community Health, Sharon Regional estimated the price for its system would run around $30 million. In a good year, that’s six times the hospital’s total profits.

Danko wasn’t understating Jameson’s position when he said such information systems are “a very, very heavy lift’’ that most independent health systems can’t afford.

If Jameson follows the same thought process of other hospital systems, its decision will likely be in hand before the end of the year.