Fox Chase, Temple health system consider affiliation

Fox Chase Cancer Center and the Temple University Health System, two institutions with storied pasts and potentially turbulent futures, are looking into a possible affiliation that health-care experts say could make sense for each of them.

While confirming that they had signed a letter of intent "to explore a potential affiliation," neither one would discuss the possibilities. In theory, those could range from outright merger to nothing at all.

The nonprofit institutions also could simply formalize what is already shared: Temple's bone-marrow transplant program serves Fox Chase patients, university medical residents do oncology training there, and several services are shared by Fox Chase and Temple's Jeanes Hospital, which sit on opposite sides of Burholme Park in Northeast Philadelphia.

"I think they have been dancing around each other for quite some time," said Jerry Katz, an independent consultant, who noted that Larry Kaiser's arrival as the Temple health system's chief executive officer may have changed the equation.

Fox Chase, one of the oldest and most respected cancer centers in the nation, is among only a handful that are not part of a university system, which offers a broad base of patient referrals and collaborations with researchers in related fields.

Its size - 100 beds, with about 8,000 new patients a year - is limited by its location. For years, Fox Chase has been searching for ways to expand its clinical and scientific facilities, along with the revenue that comes with each.

Several top researchers left after Michael Seiden took over as president and CEO in 2007 - some for the University of Pennsylvania, whose cancer center has gained stature as Fox Chase has lost it. And revenue for the five entities that make up Fox Chase - $338.3 million in fiscal 2010 - exceeded expenses by just $2.6 million after Fox Chase lost a small amount of money the previous year, spokesman Frank Hoke said. He said the year that ended June 30 was "the best fiscal year we have had in the last three to four years."

Temple is a major teaching hospital and research institution, but it lacks a prestige oncology program like Penn's Abramson Cancer Center or Thomas Jefferson University's Kimmel Cancer Center.

And the system - Temple University and Episcopal Hospitals, both in North Philadelphia, and Jeanes, which together have more than 1,000 beds - has among the highest numbers of Medicaid patients in the state. It lost nearly $15 million in fiscal 2010 (and more than twice that excluding investment income) on total revenue of $973.8 million. Results for the year that ended June 30 "are expected to be better than 2010," spokeswoman Rebecca Harmon said Friday.

In a potential affiliation, "Temple would benefit enormously because Fox Chase is a marquee institution," said Katz, who noted that Fox Chase also had partnerships with other hospitals around the region that Temple lacked. As a revenue producer, oncology "is really important," he said. "It is not only the cancer center. It is the radiology, the surgery, the chemotherapy."

In an e-mail to employees, Seiden said he would hold open staff meetings - two are scheduled for Monday - to discuss the process of exploring an affiliation. It would likely take several months, he wrote, "to rigorously evaluate how such an affiliation could advance our mission."

It is a time of great uncertainty in the field. Federal research funding has been cut since the recession. Much of how President Obama's health-care overhaul will affect individual institutions is unknown. Payments by Medicaid for the poor are being cut by cash-strapped Pennsylvania and are a target, as is the Medicare program for the elderly, in negotiations in Washington to reduce the deficit.

Small institutions with a specific focus such as Fox Chase may have fewer resources, experts said, spurring affiliations. Last month, the Kansas City Cancer Center and the University of Kansas Cancer Center announced that they had completed a merger.

Fox Chase is one of two institutions in the Philadelphia region - the other is Abramson - to be designated a National Cancer Institute comprehensive cancer center, which is based on research. Jefferson's Kimmel and the Wistar Institute have NCI's more basic "cancer center" designations.

Most institutions have endured cuts in NCI funding. Fox Chase lost 25 percent between 2005 and 2010; Penn's funding fell 11 percent, according to the National Institutes of Health's online tool, RePORT.

Meanwhile, the two virtually switched places in annual rankings of hospital cancer programs by U.S. News and World Report: Fox Chase dropped from 15th in the nation to 28th, while Penn rose from 27th to 14th. (Jefferson, which was not ranked in 2005, rose from 52d the next year to 35th in 2010.) The rankings are based on reputation and other factors, mostly involving patient care.

Lawton Robert Burns, an expert in health-care management at Penn's Wharton School, said that while he had no inside knowledge about the Fox Chase-Temple exploration, freestanding hospitals with strong financial underpinnings - such as Doylestown Hospital, Abington Memorial Hospital, and Children's Hospital of Philadelphia - typically wanted to remain independent.

"With a handful of exceptions, affiliations are done out of weakness, fear, and trembling," Burns said.

Financial pressures are particularly high in Philadelphia.

"It is hard for the city to support as much research and cutting-edge development as in the number of academic medical centers that we have here," said Thomas R. Tritton, a Fox Chase board member who is CEO of the Chemical Heritage Foundation.

Tritton said Fox Chase had been looking for ways to expand for probably half of his 15 years on the board. A high-profile attempt to build in adjacent Burholme Park was abandoned after the courts in December 2009 sided with neighbors who opposed the move. An expansion into Delaware was considered and abandoned.

Tritton and another board member, Zane Robinson Wolf, dean of La Salle University's School of Nursing, said that while Fox Chase, like other hospitals, had been hurt by the recession, they knew of no particular financial imperative behind the latest move.

Tritton cautioned that the outcome of the "exploration" was impossible to predict.

Predicting an eventual affiliation now would be like planning a romantic relationship, he said. When you first "meet a person that you want to date, you don't say, 'What is our ultimate goal here?' "