St. Luke’s University Health Network is acquiring Easton Hospital, expanding its reach and absorbing the only hospital in the Lehigh Valley that wasn’t connected to the region’s two big health networks.
Under the acquisition, which St. Luke’s announced Wednesday afternoon, the century-old facility will return to the nonprofit rolls, after operating as a for-profit venture for the last two decades.
The news wasn’t a surprise. Steward Health Care, Easton Hospital’s corporate owner, notified the state on May 1 that it would close the facility on June 30 and put 694 people out of work, unless it was able to sell. Easton Hospital President Linda Grass wrote in the notice that it was unlikely the transaction would not occur.
Three months earlier, The Morning Call had reported that Easton Hospital was for sale and likely to become part of St. Luke’s. But until Wednesday, St. Luke’s had not confirmed it was the prospective buyer.
“We stepped away from discussions with Steward in early March to appropriately focus on the epidemic and the treatment of COVID-19 patients,” Richard A. Anderson, St. Luke’s president and CEO, said in a news release Wednesday.
He said discussions resumed in late April and that St. Luke’s board of trustees decided to go ahead with the acquisition “for the health and well-being of the Easton community.”
On July 1, Easton will become part of the Fountain Hill-based St. Luke’s network, pending approval by various regulatory agencies.
Easton Mayor Sal Panto Jr. welcomed the news, after watching the hospital, which is in neighboring Wilson, struggle under two out-of-state companies. He said the the facility will be called St. Luke’s Easton.
“It’s a local health care provider, with long established traditions in the Lehigh Valley and they’re not going anywhere,” said Panto, who is an Easton Hospital trustee.
Hospitals have been consolidating into large regional health systems for decades, and the pandemic accelerated that trend, as smaller struggling hospitals needed to merge with larger ones to survive, said Ge Bai, associate professor of health policy and management at Johns Hopkins Bloomberg School of Public Health.
“This is predicted, because smaller facilities are less resilient,” she said, adding that many smaller hospitals didnt receive much of the federal pandemic funding because they haven’t treated many coronavirus patients. Some of the funding has been tied to the number of coronavirus patients.
“If you are big, you’re less likely to fall in a storm,” Bai said.
Steward, the Dallas for-profit health system that bought Easton Hospital in 2017, asked the state in March for $40 million to keep the facility open through the end of June to care for coronavirus patients. In response, Gov. Tom Wolf agreed to provide $8 million to keep it open through April.
The acquistion marks the end of an era, and not just for Easton Hospital, which opened on Wolf Avenue in Easton in 1890, then moved to its current site in Wilson in 1930. It also leaves only two competing hospitals in the Lehigh Valley, which in the last three years, has gone from five health systems to two dominant ones. Lehigh Valley Health Network and St. Luke’s have grown by acquiring smaller hospitals, most of them in rural neighboring counties, many of which were finding it difficult to keep their doors open and compete.
Last year, LVHN bought the struggling Coordinated Health, which like Easton Hospital, had been significantly cutting costs and staff to stay afloat.
Consolidation typically means higher prices, because there’s less competition and more leverage for bigger reimbursements from insurance companies, said Bai. But it also provides stability for struggling hospitals such as Easton, which will have its third owner in three years.
The number of patients at Easton has steadily declined since 2016 when nearly 7,000 patients were admitted, according to the Pennsylvania Health Department’s hospital use data. Admissions dropped by about 1,000 patients in 2018.
[More Health] Pennsylvania coronavirus case count at 73,405. Track them here. “
As patient numbers dropped, so did the hospital’s revenues, by about 18% from the 2016 to 2018 fiscal years, according to Pennsylvania Health Care Cost Containment Council data. While revenues in 2018 were at $149 million, the hospital spent $155 million, resulting in a loss of about $6 million. Steward moved to sell the facility after determining it could not turn it around.
St. Luke’s said it first explored the possibility of merging with St. Luke’s in 2001, before Easton Hospital’s board decided to sell it to for-profit hospital company Community Health Systems of Tennessee. After 16 years, CHS sold it to Steward.
St. Luke’s and LVHN both put in bids when Steward decided to sell this year, The Morning Call reported in a January story, citing the chairman of Easton Hospital’s board of trustees and two employees with knowledge of the bids. It soon became apparent that St. Luke’s was the likely buyer, as Easton maternity patients were directed to St. Luke’s-Anderson Campus in Bethlehem Township after Easton closed its maternity wing. St. Luke’s already was providing Easton Hospital patients with telestroke, trauma, neonatal intensive care and heart surgery services.
In February, Steward sent a letter warning LVHN to stop recruiting Easton Hospital physicians who are not permitted by contract to work for a competing health company.
After that the sale stalled. It may have been delayed, The Morning Call reported in February, because of a long lease Easton Hospital was under with Medical Properties Trust, which owned the facility and was leasing it back to Steward. Then the coronavirus pandemic hit.
“Integrating an existing hospital into a health network can be challenging, even during the best of times, let alone during a global pandemic,” Anderson said in the news release.
The Easton Hospital property will be owned outright by St. Luke’s, spokesman Sam Kennedy said. He did not provide further details.
While Easton Hospital avoided closure, it may look different under St. Luke’s banner.
State Rep. Robert Freeman, D-Northampton, whose district includes Easton Hospital, said St. Luke’s administrators told him they planned to significantly reduce the number of beds at the hospital and then build them back up over time. St. Luke’s did not comment on its plans for Easton.
Freeman said that on a conference call he had earlier this week with Anderson and two other St. Luke’s officials, Anderson said “they want to right-size it for the moment and continue to grow it over time.” It was Freeman who the governor in March to intervene when Steward threatened to close the hospital.
Also unclear is what Easton’s cafeteria staffing will look like once the deal closes. In a notice to the state May 27, Morrison Healthcare said all 38 food and nutritional services employees there will be laid off June 30. Kennedy said, ultimately, cafeteria staffing will depend on patient volumes at Easton.
Don Cunningham, president and CEO of Lehigh Valley Economic Development Corp., said if Easton Hospital is downsized under St. Luke’s, that’s still a better situation than if the facility had been forced to close.
He said the hospital’s previous two owners, CHS and Steward, had regular leadership transitions and did not engage or connect with local officials.
“The for-profit model at Easton Hospital had really been struggling for a decade and you’ve got a high-quality health network in St. Luke’s with resources,” Cunningham said. “The purchase makes tremendous sense, both from a patient care perspective and maintaining a hospital in Easton. We had been expecting this for some time, and it was encouraging that it was still able to go forward during the most recent crisis.”
Morning Call reporter Binghui Huang can be reached at 610-820-6745 and Bhuang@mcall.com.
Morning Call reporter Daniel Patrick Sheehan contributed to this story.
