CHOP rumored to be involved in Health Sys. deal

In the University's ongoing search for a solution to the Health System's financial woes, the Children's Hospital of Philadelphia has emerged as a possible suitor. CHOP has reportedly taken part in discussions with the special committee charged with looking at all possible options for the future of the Health System. "Any negotiations at this point have just been preliminary," said Cynthia Atwood, a CHOP spokeswoman. She was quick to point out that, as far as she knows, "nothing has been put on the table for active consideration." Penn officials are currently debating the future of the $1.9 billion Health System -- plans which could include selling part or all of the system. While CHOP's involvement in any potential deal remains unclear, sources say CHOP could emerge as either a buyer or as some sort of strategic partner. The Health System has lost $330 million in the past three years, though administrators say they are confident there will be a surplus next year. Their committment to maintaining a University-owned Health System remains in question. A high-ranking Medical School faculty member confirmed the existence of a rumor that "CHOP might be looking to buy the Health System." The committee of Medical School faculty members and University Trustees appointed by University President Judith Rodin met Monday night in the fifth meeting since the committee's creation last month. In an interview, Provost Robert Barchi explained that CHOP's long-standing collaboration with Penn creates a natural interest in the situation. "We share faculty and our faculty provide the clinical services at [CHOP] and my guess is that they would be deeply interested in any motion the University of Pennsylvania Health System would make in its organization and structure," he said. Barchi was not present at Monday's meeting, and deferred questions regarding the committee to Rodin. Rodin, who chaired the meeting, declined to comment, as did several members of the committee. University spokeswoman Phyllis Holtzman would neither confirm nor deny whether CHOP was discussed at the meeting. "There have been a whole range of things on the table," Holtzman said. "A lot of institutions and organizations have approached the University." Vanguard Health Systems, a for-profit organization based in Nashville, Tenn., has been mentioned in past news reports as a possible buyer of the Health System. But since CHOP is an academic hospital, there is a strong case for the University to make a deal with a fellow teaching institution as opposed to Vanguard. "[CHOP] brings their international reputation for clinical and research excellence," said Robert Field, Director of the Health Policy Program at the Philadelphia-based University of the Sciences. "They have a history of working with the Medical School [and] they also bring a non-profit orientation," he added. Field said he suspected "many of the faculty members at Penn would prefer to be associated with an academically-oriented institution rather than a for-profit one." Officials at Vanguard declined to comment. Linton Whitaker, chief of plastic surgery at CHOP and the Hospital of the University of Pennsylvania, expressed strong displeasure at the possibility that a for-profit organization like Vanguard might ultimately take over the Health System. "It would be a disaster if it was a for-profit institution," Whitaker said. "It would mean the demise of the academic center as we know it now." The University of Pennsylvania Health System was established in 1993 with the expressed purpose of serving the academic mission of the University. When CHOP moved from South Philadelphia several decades ago to its current location next door to HUP, the two parties developed an agreement to ensure that the hospitals would not compete. The University Medical School and CHOP currently share pediatric faculty. A source familiar with the Health System's expansion over the past several years said it was once hoped that the academic affiliation would spill over into a provider affiliation between the two health systems, with the Penn Health System taking the lead. The source pointed to the inclusion of CHOP physicians in the PennCare health insurance program as evidence of attempts to integrate. But times have changed -- and experts now say CHOP is in the dominant bargaining position. Field likened a deal between CHOP and the Health System, should it take place, to the recent mega-merger between America Online and Time Warner. "Who would have thought five years ago that AOL would have been the one to acquire Time Warner?" he said. Wharton professor Sean Nicholson, who specializes in health care management, emphasized that no deal can be made if the price is not right. "Ultimately, if it happens, it boils down to what the prices are," he said. Should a deal not take place with CHOP, Wharton professor Mark Pauly noted that a deal with a business like Vanguard would not necessarily be a bad thing. "A good deal with a for-profit firm is better than a bad deal with a non-profit firm," he said.

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