Sale of hospital expected by November

By KATIE WORRALL

With the sale of Chestnut Hill HealthCare in November come prospects for enhanced clinical programs and additional physicians.

The boards of Chestnut Hill Hospital and  Chestnut Hill Springfield Center — together with  boards of their parent entity, Chestnut Hill  HealthCare, and Chestnut Hill Health System, an entity that looks into issues faced by the health system — approved the sale of the facilities to a joint venture formed by Vanguard Health System and the University of Pennsylvania Health System (UPHS)  last week.

“We’re looking at enhancing existing programs and adding new programs in association with Penn’s clinical resources,” Herbert F. Goodrich, chairman of the Chestnut Hill HealthCare board of trustees, told the Local last Friday.

Goodrich said Chestnut Hill HealthCare will enter a new relationship with Penn, a closer one than it has had in the past, bringing new intellectual and monetary capital. (In 1995, Chestnut Hill HealthCare began an affiliation with the University of Pennsylvania Health System that did not change the ownership but provided clinical care by specialists, in fields such as infertility that were not needed on a full-time basis.)

In a statement, Chestnut Hill HealthCare said that UPHS will support the development of new programs with initial emphasis in areas of cancer, cardiology, rehabilitation, surgery, women’s services — including obstetrics/gynecology — and graduate medical education.

Goodrich said that a cancer and imaging center that had been considered for the Springfield Center campus and then put on hold will again be considered, but it might be sited elsewhere.

“Over time with the changing relationships of the campuses, gradually we will see more construction and we hope to increase medical staff and be a busier place. It will take time,” Goodrich said.

The Chestnut Hill HealthCare board president does not anticipate changes in the number of other staff members. “The day after consummation of the sale, the place will be the same as the day before,” he said.

Any building plans will be consistent with the parameters outlined in the 1991 Chestnut Hill Hospital and Chestnut Hill Community Association master plan. Parameters of the plan include requirements for open space, building heights, setbacks from street or property lines, architectural design that recognizes the residential character of the neighborhood and landscaping.

The news release said Vanguard will be responsible for the day-to-day management services at the hospital, Chestnut Hill Rehabilitation Hospital and Springfield Residence assisted living facility as well as making investments in facilities and equipment.

The sale of CHHC for $25 million includes a commitment on the part of Vanguard/UPHS joint venture to invest at least $50 million in the first five years after settlement, expected to be in November, as well as the establishment of clinical programs and affiliations with Penn, the statement said.

Vanguard Health Systems, a Nashville, Tenn. investor-owned company, owns and operates 16 acute care hospitals, two ambulatory centers, five diagnostic imaging centers and many other related health care services in Phoenix, Ariz.; Orange County, Calif.; Chicago, Ill.; and San Antonio, Texas.

“We are pleased that the board has agreed to pursue the sale of CHHC to the Vanguard Health Systems/University of Pennsylvania Health System joint venture,” said Charles N. Martin, Jr., chairman and CEO, Vanguard Health Systems, in the statement. “With the University of Pennsylvania Health System’s record of clinical excellence and Vanguard’s access to capital, this partnership will allow CHHC to maintain its proud heritage and mission of providing high quality health care to the patients it serves.”

UPHS is excited about the opportunity to partner with Vanguard Health Systems to build upon the existing strong clinical services provided by the physicians and staff at Chestnut Hill Hospital, according to Ralph W. Muller, CEO, UPHS. "This arrangement will help further enhance patient care in Northwest Philadelphia and eastern Montgomery County by permitting the expansion of select PENN Medicine programs and services, nationally recognized for clinical excellence,” Mueller said.

The Vanguard/UPHS joint venture will be a taxable entity, not eligible to receive tax-deductible donations. A resolution of the CHHC board of trustees, adopted last September ensures funds raised by CHHC remain in a separate organization, the Chestnut Hill HealthCare Foundation, to benefit the community. Once the transaction is finalized, the endowments, donations and other charitable assets of CHHC will be transferred to the foundation. The foundation will receive, hold, administer and disburse these funds, engage in fundraising and monitor the Vanguard/UPHS joint venture progress in meeting its commitments made in the definitive agreement.

Chestnut Hill HealthCare began looking for a strategic partner in January 2003, when the hospital — like many other independent hospitals in the region — was facing constraints in financial and human resources.

“We entertained proposals from several organizations,” Goodrich said last week. “We sorted through proposals that were very different. Temple University Health System and Albert Einstein Health Network proposals were each very different and had different characteristics.”

Since selecting the joint venture of Vanguard/UPHS in February, the most difficult part of the “three-cornered” discussion with Vanguard and Penn was the direction in which to go, as well as scheduling meetings and negotiating terms of selling the assets, Goodrich said. With approval by the boards last week, legal documents will be finalized and required regulatory approvals will be sought.

The required regulatory review process is expected to take up to 90 days and includes review of the transaction by the Pennsylvania Attorney General; review of the transaction and transfer of charitable assets by Montgomery County and Philadelphia Orphan's Courts and change of ownership survey by the Pennsylvania Department of Health. The transaction is expected to be completed by November.

Cary F. Leptuck, current president and CEO of CHHC, who had deferred retirement through the partner evaluation process, will remain until a new CEO is named. An executive search is underway.