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Penn State Health, PinnacleHealth end merger effort

STATE COLLEGE – After going no, yes, and no again with federal regulators and judges, Penn State trustees decided Friday to stop asking about merging Harrisburg-based PinnacleHealth into its Penn State Health enterprise.

Penn State’s board of trustees voted 27-0 by telephone Friday to formally end its pursuit of the combination.

University officials said $17.6 million has been spent on the effort through this summer’s unsuccessful argument before the 3rd U.S. Circuit Court of Appeals, a cost they said has been totally funded by its health care businesses.

The trustee’s vote, which followed a 30-minute executive session, came one week after Penn State Health’s own board of directors, on Oct. 6, had also recommended termination of the PinnacleHealth affiliation agreement.

Neither vote was a shock.

The two biggest Harrisburg-region health systems had earlier told their employees it was likely they would give up the effort in the event of a decision like the one handed down by the appeals court in September.

Dr. Craig Hillemeier, Penn State’s Senior Vice President for Health Affairs and CEO of the Milton S. Hershey Medical Center, said in an email to staff after Friday’s vote that the decision to suspend the merger is based in large part on the expected “time and cost associated with continuing litigation,” balanced against the prospect of reversing the Circuit Court’s decision.

“PinnacleHealth and Hershey Medical Center have enjoyed a positive and collaborative working relationship as we explored opportunities to integrate,” Hillemeier said.

“Where circumstances allow and where it makes the most sense for our patients, we will continue to collaborate in the future.”

He also noted, for the record, “our future remains bright.”

PinnacleHealth President and CEO Michael Young sent a similar email to his staff on Friday, as well.

Initially announced in 2014, Penn State officials touted the merger with Pinnacle – which operates three hospitals in Dauphin and Cumberland counties – as a way to stabilize the long-term economic future for Penn State’s medical school in Hershey.

Joining with Pinnacle, officials said, will help the medical school shore up and even grow long-term patient and revenue bases needed to support its academic and research missions.

That’s particularly important, university officials said, as two other Pennsylvania health care giants, the University of Pennsylvania’s and the University of Pittsburgh’s medical centers, look to push deeper into central Pennsylvania.

PinnacleHealth officials said the combination would help their patients and physicians too.

Penn State-Hershey’s medical school and major role in government-funded research meant the merged system would give Pinnacle’s patients seamless access to medical specialists, advanced-care hospitals and other services such as participation in leading-edge clinical trials.

The agreement was opposed by both the Federal Trade Commission and Pennsylvania’s Office of the Attorney General, which argued that the proposed combination would create too dominant a player in the South Central Pennsylvania health care market.

They said a merged Hershey-Pinnacle would have a monopoly that would leave patients and insurers with no comparable alternative should Hershey-Pinnacle jack up prices.

Though Penn State won an initial court battle in U.S. District Court this spring, the merger agreement was jeopardized again last month when the Circuit Court overturned Judge John Jones’s decision.

Penn State Health officials did not speak directly Friday to how their strategic plan might be revised with the PinnacleHealth jointure dead, but Hillemeier is expected to address Penn State’s trustees on that topic at a future board meeting.

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