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 Highmark Blue Cross Blue Shield, University of Pittsburgh Medical Center, Children's Hospital, St. Francis Health System and Jameson Health System Join Together to Address Important Community Health Care Issues

Pittsburgh, Pa., August 19, 2002 — Highmark Blue Cross Blue Shield, University of Pittsburgh Medical Center, Children's Hospital of Pittsburgh, St. Francis Health System and Jameson Health System today proposed a $520 million initiative, that if approved, will better meet the needs of Western Pennsylvania residents.

The proposal was submitted to the Allegheny County Court of Common Pleas Orphans' Court Division, which has jurisdiction over not-for-profit transactions. If approved, the proposal will provide for:

  • The dignified closing of St. Francis Health System;
  • The construction of a new Children's Hospital of Pittsburgh and research facility to be located on the St. Francis campus in Lawrenceville;
  • The merger of St. Francis' New Castle operations into Jameson Health System;
  • The consolidation of St. Francis' Cranberry operations with UPMC Passavant.
  • The following is a breakdown of the $520 million initiative:

Highmark will provide $233 million to Children's Hospital for the purchase of the Lawrenceville site and construction of a new hospital and pediatric research facility. In addition, Highmark will provide $17 million to Jameson Health System for the acquisition of the St. Francis Hospital of New Castle.

UPMC will invest $270 million with the majority going toward the construction of a new Children's Hospital and pediatric research facility and the remainder being used to acquire St. Francis Cranberry and to purchase St. Francis' interest in Community Care Behavioral Health.

Highmark Blue Cross Blue Shield also announced today that it has reached a long-term agreement with University of Pittsburgh Medical Center that provides Highmark's members with long-term access to UPMC facilities and physicians.

Details include a 10-year contract for Highmark's traditional and managed care health plans and a five-year contract for Highmark's SecurityBlue Medicare HMO plan. Under the agreement, payment increases to University of Pittsburgh Medical Center will be similar to what other area hospitals have received during the last contract period.

Representatives from the prominent health care institutions revealed their thoughts on the proposed initiatives.

"Today's actions represent a community-focused solution to a number of critical health care needs in our region," said Kenneth R. Melani, MD, executive vice president, strategic business development at Highmark Blue Cross Blue Shield.

"We have heard the call from our community leaders and are working together with University of Pittsburgh Medical Center, Children's Hospital and the St. Francis Health System. Together we are ensuring broad access to UPMC health care facilities for Highmark members, a final solution to the need for a more modern Children's Hospital, and economic support for the Lawrenceville community through the reinvention of St. Francis' facility."

"The Sisters of St. Francis of Millvale offer good wishes and the pledge of ongoing prayer to those who promise exceptional health care for the most vulnerable in our society," said Sister Ann Carville of St. Francis. "In serving the little ones, the tradition of St. Francis will be preserved."

"For the past several years, the St. Francis Health System, like so many other institutions throughout the United States, has struggled to remain a viable, independent Catholic institution," said Raymond J. Khoury, president and CEO of St. Francis Health System. "After exploring a wide range of financial options, the board has concluded that we could no longer maintain our independence in today's costly and highly competitive health care environment. While we made progress in recent months in stabilizing our financial condition, the system lacked the ability to invest in modernization and program improvements needed to compete. In addition, we believed we had an obligation to honor our responsibilities to our creditors."

"This is an historic day of transition for the health care industry in western Pennsylvania," said John Paul, executive vice president of University of Pittsburgh Medical Center. "Today, we say farewell to an institution that has served this community well for 137 years. As part of the legacy of St. Francis, we welcome a new era of cooperation wherein the major health care players in this region are working together in a thoughtful and deliberate way to better serve the citizens of western Pennsylvania. The challenges have been great and will remain so, but the future for the health care in this region is filled with exciting possibilities."

"We are very pleased with the decision to relocate and build on the Lawrenceville site, which is capable of housing both current and future growth of Children's clinical and research programs," said Ronald L. Violi, president and chief executive officer of Children's Hospital of Pittsburgh. "We believe it will ultimately benefit the health care community at-large, and it will allow us to meet the growing demands of the children and families we serve."

Melani pointed out that it was during recent contract negotiations with University of Pittsburgh Medical Center that the two parties agreed to work cooperatively to address the current health care issues that would negatively impact western Pennsylvanians if not resolved. "During recent contract negotiations, securing an affordable, long-term hospital contract for Highmark members was our number one priority," he said. "But we also identified a number of other critical health care issues facing our communities that could not be resolved unless we worked together to address these challenges. By pooling our resources, we can meet these challenges head on and better serve the members of our communities."

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