Penn close to acquiring Lancaster General Health

The University of Pennsylvania Health System has moved a step closer to acquiring Lancaster General Health, a $1 billion health-care system anchored by a 533-bed hospital in downtown Lancaster.

Penn Medicine officials told staff in an e-mail Friday that the health system had signed a nonbinding letter of intent and will try over the next 30 to 45 days to reach a "final definitive agreement" that would make Lancaster General part of the Penn system, the largest health-care system in the Philadelphia region.

"LGH is an outstanding institution, and we look forward to continuing to expand our relationship with them in order to benefit both health systems and the communities and patients we each serve," Penn spokeswoman Susan Phillips said.

If the deal with Lancaster General is completed, it would represent a further push west by Penn, which acquired Chester County Hospital in West Chester in September 2013.

About a year ago, Penn and Lancaster General formed an alliance that gave patients of the Lancaster health system an inside track to specialized services at Penn, and was designed to help Penn attract patients who might otherwise go to Thomas Jefferson University Hospital in Philadelphia or Penn State Milton S. Hershey Medical Center in Hershey, executives said at the time.

Those are among the traditional reasons for such consolidation, said Alan Zuckerman, president of Health Strategies & Solutions Inc., a consulting firm.

The combination also would help Penn capture the broad population base needed to operate under new financial models that will force health-care providers to assume financial risk, Zuckerman said.

Lancaster General had $47 million in operating income on $1 billion of total revenue in the year ended June 30. Penn had total revenue of $4 billion and operating income of $291.39 million.

Another big move at Penn is the planned demolition of Penn Tower in West Philadelphia. It would be replaced with a new hospital tower if the project gets a green light from the university's board.