3/31/1997

PITTSBURGH, March 31, 1997 — Shadyside Hospital officially becomes part of the University of Pittsburgh Medical Center System (UPMCS) today, it was announced by Jeffrey Romoff, president of UPMCS and Henry Mordoh, former president of Shadyside Hospital and current chief executive officer of Shadyside and Presbyterian University Hospitals. Because of this merger, Shadyside Hospital and Presbyterian University Hospital will become the two tertiary care centers within the UPMCS, bringing together the specialty strengths of the university faculty and the private practice physicians of both institutions. This contrasts with the other hospital acquisitions and planned mergers within the UPMCS designed to enhance and expand the services provided by community hospitals to specific geographically-defined constituencies.

"Shadyside Hospital and the UPMC will operate as one clinically and administratively integrated economic unit," stated Mr. Mordoh. "We expect to reduce health care costs by millions of dollars as a result of this merger. We are positioning ourselves to be both the highest quality and lowest cost provider in the area," he continued.

Mr. Mordoh went on to say that the changing health care environment is placing more and more of the financial risk on the provider with the pressures of managed care coupled with lowered reimbursement from Medicare and Medicaid. He concluded that it is virtually impossible for any provider to operate independently outside an integrated system.

"This merger capitalizes on the strengths of both organizations," stated Jeffrey Romoff. "Combining Shadyside's tradition of delivering the best private practice medicine in a patient-friendly, high-quality environment with the academic and research capabilities of one of the nation's leading medical centers is the prudent action for two geographically proximate institutions. We have replaced competition with synergy," he concluded.

UPMCS Centers of Excellence in a variety of medical specialties will be housed in either Presbyterian University Hospital or Shadyside Hospital. Centers of Excellence, as defined by insurers, are those organizations that offer advanced technology, clinical research and educational programs. In addition, they have significant staff size, patient volume and revenue to maintain a leadership edge in specific clinical areas.

Among the programs of centers of excellence stature slated to move from the Oakland campus to Shadyside are some services of the Benedum Geriatric Center and the University of Pittsburgh Cancer Institute. Shadyside Hospital also will house the University of Pittsburgh's Joint Reconstructive Surgery Center.

Some of these services are currently housed at Montefiore University Hospital. Under the merger, Montefiore University Hospital will close as an acute care hospital. Those acute care services not moving to Shadyside will move to Presbyterian University Hospital and other UPMCS hospitals such as UPMC St. Margaret and Passavant. Space at Montefiore will be converted to house important components of the health care delivery system such as ambulatory programs (including outpatient surgery) and sub acute care units. Closing Montefiore as an acute care facility is expected to result in 6,000 new annual admissions to Shadyside Hospital.

Presbyterian University Hospital and Shadyside Hospital will be governed by a joint board of directors. Representation on the board will be equally divided among Shadyside Hospital, Presbyterian University Hospital and the University of Pittsburgh. Shadyside Hospital also will have five designated directors on the parent UPMCS Board of Directors.

Under this merger, Henry Mordoh, former president of Shadyside Hospital becomes chief executive officer of both Shadyside and Presbyterian University Hospitals. Edward Klaman, former executive vice president/chief operating officer of Shadyside becomes executive vice president/chief operating officer of the combined organizations. Jeffrey Romoff and John Paul continue as president and executive vice president/chief operating officer, respectively, of the UPMCS, which oversees all the hospitals and other corporations.