The University of Pennsylvania Health System announced a tentative agreement to acquire Doylestown Health in January, but there were conditions.
Doylestown has posted losses in three of the past four years and needed to cut its operating loss for the year ended June 30 to $6.7 million.
Doylestown CEO Jim Brexler said Tuesday that the nonprofit exceeded its goal by $800,000, meaning the system finished with a loss of roughly $5.9 million.
The achievement follows the signing of a definitive agreement on Wednesday for the University of Pennsylvania to acquire Doylestown Hospital, a 247-bed hospital that will become the seventh hospital in the University of Pennsylvania system. Pending regulatory approval, the transaction is expected to close early next year.
Kevin Mahoney, CEO of the University of Pennsylvania Health System, said Penn would have pulled out if Doylestown hadn’t been able to cut its operating losses last year by at least $12.6 million. “This would not have happened,” he said.
Mahoney is pleased to see Doylestown turn its finances around. “We’re very happy to have them on board with us. Great things are going to happen,” Mahoney said.
The addition of Doylestown fills a gap in Penn’s geographic reach and ensures referrals to high-quality care at its flagship hospital in University City.
The Penn Doylestown deal leaves just two standalone hospital systems in the Philadelphia region: Redeemer Health and Grand View Health. Both continue to lose money. Redeemer announced in 2022 that it was looking for someone to take over the hospital, but no progress has been made.
Doylestown Hospital was independent for a century.
Less than a year before signing a preliminary agreement with the University of Pennsylvania, Doylestown Health celebrated its 100th anniversary.
The May 2023 event was held at the headquarters of the Doylestown Village Improvement Association, a women’s organization founded in 1895 to promote the health and beauty of the town.
An association board ran the hospital until it hired its first professional administrator in 1960. Brexler is only the third person to hold the top administrative position.
Brexler said at the event that the association’s board is focused on running the hospital with “patient tenacity” and keeping and expanding services local.
Brexler said in January that such staunch independence no longer made sense because COVID-19 had exposed financial vulnerabilities. He told the Doylestown board that Doylestown needed to work with another organization to secure its future in the community. “We have to be staunchly committed to the mission that we fulfill,” he said.
How Doylestown Fits into Pennsylvania Medical School
Doylestown will be a relatively small addition to the Penn Health network. Doylestown has revenue of $418 million in fiscal year 2023, compared with Penn Health System revenue of $10 billion. Neither system has yet released financial results for the fiscal year 2024, which ended June 30.
In addition to three hospitals in Philadelphia — the Hospital of the University of Pennsylvania, Pennsylvania Hospital and Presbyterian Medical Center — the University of Pennsylvania also owns Princeton Medical Center in Plainsboro, New Jersey, Chester County Hospital in West Chester and Lancaster General Hospital in Lancaster.
As part of the University of Pennsylvania system, Doylestown will retain a local board that makes some decisions, such as when to add a neurosurgeon or hire an obstetrician. The local board also helps set priorities. Homelessness has become a real problem in Lancaster, Mahoney said. “The Lancaster General Board is asking us to address this issue.”
Meanwhile, financial matters are handled at the system level, but each Pennsylvania hospital has its own individual revenue targets, and local boards and hospital executives need to understand how their hospitals fit into a health system with a single balance sheet, Mahoney said.
“If HUP is the right location, it’s just as important for Doylestown patients to be seen there as it is for Doylestown patients to stay in Doylestown,” he said.
The addition of Doylestown Hospital will impact University of Pennsylvania’s plans to open a large outpatient center in Montgomeryville in February or March.
Without the Doylestown deal, the new facility “probably would have had a radiation oncology and surgery center as well,” Mahoney said, predicting it would “work in close coordination with Doylestown.”
