From the August 2, 2002 print edition
Philadelphia Business Journal
1987: When merger frenzy hit health care
John George Staff Writer
It started modestly enough, in the summer of 1987. First, Graduate Hospital acquired the Mt. Sinai-Daroff Division in South Philadelphia from Albert Einstein Healthcare Foundation for $10.8 million. Then a few weeks later, Thomas Jefferson University Hospital took over the management of the financially distressed West Park hospital near Fairmount Park.
By the time the merger-alliance-affiliation-partnership craze had died down -- something that's only recently occurred -- only a handful of area hospitals were left as standalones.
Most the 100-plus hospitals in the region today are linked to larger networks.
In all of the deal-making, the goal has remained the same. Hospitals have sought to be part of larger organizations to gain clout needed to deal effectively with insurers and achieve the cost savings needed to cope with declining reimbursements.
During the process, all of the systems have experienced growing pains.
Allegheny Health Education and Research Foundation was, for a short time, the largest system in the region before succumbing to bankruptcy -- saddled with more than $1.2 billion in debt -- in 1998. Few, if any, health systems have escaped significant job reductions.
SEE: 1998: Allegheny collapse: Still a record (Free Registration required)
The build-it- yee-shall-come mentality of the late 80's-90's did not work in older cities where patients were attached to doctors and local hospitals. When services were moved just 5 miles down the road, there were no takers ( City Line was turned into a Women's Health Only facility).
STILL experiencing the fallout from capitation and mistake of purchasing Physicians practices. Created MUCH bad blood between docs and hospitals still today in my area as practices abandoned by hospitals a few years later or demands to move to more 'desirable' locations.