Allegheny Health Network, Excela Health at odds over planned microhospital

Boardroom
Allgeheny Health Network is at odds with neighboring health system Excela Health over its plan to build a new "neighborhood" hospital.

Allegheny Health Network plans to build four "neighborhood" hospitals in the greater Pittsburgh area, but not everyone is welcoming the new facilities. 

AHN announced in October it would invest $1 billion to build new hospitals and renovate some existing facilities. Through a partnership with Emerus, the largest builder of "microhospitals" in the U.S., AHN intends to open four new microfacilities over the next 18 to 24 months. 

The hospitals would include between 10 and 12 beds for short-term stays and observation while also offering emergency, primary and specialty care, AHN said. 

AHN is planning to open the first microhospital in 2019 in Westmoreland County, located just east of Pittsburgh, it announced Monday. It's a move that will put it in direct competition with Excela Health, the system whose three hospitals have served the county for decades, according to an article from the Pittsburgh Post-Gazette. 

RELATED: 'Micro-hospital' model could help underserved populations 

In the announcement, Allegheny Health Network noted that the move is the system's "latest and largest expansion" of its footprint in the county. 

Excela and AHN have a tense relationship, according to the article.

In 2012, Excela board members said AHN's parent company Highmark was seeking to buy the system, which Highmark denied, saying instead that it wanted to collaborate.  

Excela CEO Bob Rogalski told the newspaper that the Highmark's plans to build the microhospital in the county would drive up healthcare costs in the region. "I view it as predatory, and I don't think it can be justified," he said. 

RELATED: Geisinger Health System and Highmark announce plans to create a community-based clinical network 

Highmark executives said at a press conference Monday that $140 million in healthcare for Westmoreland County residents is provided outside the county, and AHN expects that it can recapture about $100 million of that revenue, according to the article. 

Rogalski told the Pittsburgh Tribune-Review that about 80% of the some-5,000 Excela employees are insured by Highmark. The decision to open their facility within two miles of one of Excela's hospitals could force him to "re-examine our relationship with Highmark," he said. 

Westmoreland County officials, however, welcomed AHN's push into the area. Allegheny Health Network CEO Cynthia Hundorfean said there will be enough patients for both systems to thrive in the region, and welcomed future opportunities to partner with Excela, according to the Tribune-Review.

"I think there's more than enough business to accommodate everybody," she said.