Drexel opts back in for Allegheny deal

Officials hope to merge Allegheny's medical school with Drexel. The Associated Press Two weeks after Drexel University trustees rejected an initial proposal to manage the Allegheny Health System's medical school, the same board yesterday unanimously approved a revised deal, with an eye to the eventual merger of the school with Drexel. The deal, announced at a press conference following the meeting, was considered a key to completing Tenet Healthcare Corp.'s proposed $345 million purchase of Allegheny's eight bankrupt Philadelphia hospitals. Drexel trustees rejected Allegheny's first invitation to manage the university on October 13, but Drexel President Constantine Papadakis said trustees consulted with experts who reassured them about what was involved in the health education field. Allegheny creditors also sweetened the deal by promising $50 million for Drexel's endowment. Papadakis said that would provide ''more cushion'' to make up for Drexel's ''lost opportunities'' during the time it would manage the school. Drexel officials have said the takeover would be a major drain on Drexel's ability to raise money for its endowment. Papadakis called the arrangement ''a marriage made in heaven.'' ''We feel that [Allegheny's] tradition of excellence in medical education will match our tradition of excellence in engineering and technical education, and will strengthen both institutions,'' he said. Under the 32-month agreement, the Allegheny University of the Health Sciences, which has 3,100 students, will operate as a non-profit institution. Drexel will be paid a management fee and expenses for running the school, but will have no financial risk from the arrangement and will look to merge the two institutions within 2 1/2 years. ''Drexel University is not undertaking this management agreement just for the sake of managing or collecting a fee. Our intent is to merge,'' Papadakis said. Later, Papadakis told about 300 Allegheny faculty and staff members at a meeting at the Center City campus that the new school must stop losing money, and he said some employees might lose their jobs. ''I don't promise you an easy way out of this,'' he said. ''You will have to be ready to make sacrifices. It took years to get to this state, to a bankruptcy. I want it to take not so many years to turn it around.'' Papadakis drew applause when he promised an organization run by ''people who know what they are doing'' and again when he said the new institution would not use the Allegheny name. The new name will be chosen later. Faculty members, meanwhile, pressed him for a role in the governance of the new school and for openness in decision-making. Papadakis said there was no ''quid-pro-quo'' support from the city and state other than ''the good will that flows from the fact that we have stepped to the plate'' to help save jobs and preserve such a venerable institution. Allegheny Health, Education and Research Foundation filed for bankruptcy in July, citing $1.3 billion in debt, mainly at eight Philadelphia-area hospitals. The acquisition of Allegheny's Philadelphia empire by Tenet, a Santa Barbara, Calif.-based for-profit hospital operator, is slated for final review and approval November 5 in U.S. Bankruptcy Court in Pittsburgh. Tenet's winning bid September 29 was contingent upon finding an academic partner to manage the university.

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