Merger Games

Merger Games: The Medical College of Pennsylvania, Hahnemann University, and the Rise and Fall of the Allegheny Healthcare System

Judith P. Swazey
With the research collaboration of Carla M. Messikomer
Vicki Leeman Hall
Judith C. Watkins
Copyright Date: 2012
Published by: Temple University Press
Pages: 307
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  • Book Info
    Merger Games
    Book Description:

    With deepening financial problems, Allegheny Heath, Education and Research Foundation filed for bankruptcy in 1998-in the midst of its landmark merger of The Medical College of Pennsylvania and Hahnemann University. What resulted was another dire event in an escalating disaster. As civil and criminal investigations probed Allegheny's collapse, the survival of the medical school and other health sciences university schools, and the operation of the hospitals hung in the balance. Fortunately, a savior arrived in the form of Drexel University who used this opportunity to create its own medical school.

    Merger Gamesis Judith Swazey's gripping account of this historic transaction. Based on extraordinarily detailed first-hand research and continuous inside access to the developments, this book clearly delineates who the players were and what this merger means for the future of medical education and institutional healthcare.

    Merger Gamesis a definitive history of one of the most important academic medicine mergers in Philadelphia and the country, which happened at a time when medical care was becoming commodified in almost every state.

    eISBN: 978-1-4399-0719-1
    Subjects: Health Sciences, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-xii)
  4. Acknowledgments
    (pp. xiii-xvi)
  5. Prologue. “Honoring the Past, Creating the Future”: The Last Commencements of the HU and MCP Schools of Medicine and the First Commencement of the MCP& HU School of Medicine
    (pp. 1-10)

    Broad street, one of Philadelphia’s most historic thoroughfares, was festooned with banners as the medical students marched to the Academy of Music—the performing arts center that was home to the Philadelphia Orchestra—to receive their long-awaited doctor of medicine degrees. The banners, fluttering in the breezes of those two hot, humid days, bore the names of the MCP and Hahnemann School of Medicine and the Allegheny University of the Health Sciences of which it was a part.¹ Emblazoned with the words “Honoring the Past, Creating the Future,” which was created by a medical student and selected as the slogan...

    • 1 Setting the Stage: Hahnemann, MCP, and Allegheny
      (pp. 13-27)

      We begin our story of the merger of Hahnemann University (HU) of the Health Sciences and the Medical College of Pennsylvania (MCP) by moving back in time to the nineteenth-century beginnings of its principal organizations—Hahnemann and MCP in Philadelphia¹ and the Pittsburgh-based Allegheny health care system (Allegheny Health, Education and Research Foundation, or AHERF)—and aspects of their evolution through the beginning of the 1980s. This historical synopsis is a selective one that focuses on some of the critical events and their patterns, because many of the factors that shaped the events’ respective developments and, perhaps most importantly for...

    • 2 Entering the Merger Arena
      (pp. 28-50)

      The contours of the arena in which Allegheny acquired Hahnemann in November 1993 took gradual shape from the early 1980s through mid-1993. The playing field was formed by events and decisions made by the boards and senior administrators of the medical College of pennsylvania and Allegheny Health services that led to MCP becoming part of the Allegheny system, by Hahnemann university’s realization that its survival depended on some form of partnership with a financially strong organization, and by its president’s and board’s first efforts to forge such an alliance.

      The internal dynamics at MCP and Hahnemann were strongly affected by...

    • 3 If at First You don’t Succeed: The Acquisition of Hahnemann
      (pp. 51-73)

      By spring 1993, HU’s president Iqbal Paroo and board chairman Alfred Martinelli agreed that HU’s financial and academic management problems were grave enough “to revisit the option of consolidation.” In May Martinelli convened a trustees’ retreat. the attendees “agreed quite emphatically that maintaining the status quo at Hahnemann was not a viable option and that alternatives needed to be explored” and “charged management with examining avenues to achieve a sound future and preserve the interests of our constituencies.”¹ Their conclusion and their charge to Paroo and his senior staff signaled an end to HU’s moratorium on seeking an alliance with...

    • 4 “Our Maximum Leader”: Sherif S. Abdelhak
      (pp. 74-98)

      For many within and without the organization, the Allegheny Health, education and research Foundation and its president and CEO sherif S. Abdelhak—called sherif by most of those who knew him—were synonymous. “Allegheny is sherif; sherif is Allegheny,” was a litany we heard on many occasions. As a prominent pittsburgh businessman remarked to us, “I’m not sure whether sherif is a person representing an organization or an institution represented within a person.” During his years as the head of AHERF, sherif ruled with virtually total and seldom-challenged control over the corporation’s march from pittsburgh into eastern pennsylvania, including the...

    • 5 Corporate, Higher Education, and Teaching-Hospital Merger Arenas
      (pp. 101-111)

      Aherf’s acquisition of MCP in 1987 and of HU in 1993, its subsequent merger of the two institutions, and the organization’s addition of numerous hospitals, primary-care groups, and physician practice plans to its health care system were part of a larger economic and social landscape of mergers and acquisitions (customarily abbreviated as M&As) in the united states during the 1980s and 1990s. AHERF was unusual in that its acquisitions crosscut corporate, educational, and health care arenas. With respect to this book’s primary focus, furthermore, AHERF’s acquisitions of MCP and HU and their merger had four other unique aspects. To begin...

    • 6 Merger Patterns: Human and Organizational Upheavals
      (pp. 112-126)

      While the merger of MCP and HU and the collapse of AHERF have particularistic elements, it is not a unique story. For, transcending this detailed case study, it illuminates common and salient elements in mergers, in the complex processes of merging and in the actions that can lead to the downfall and dissolution of both for-profit and nonprofit corporations. Whether the complex processes involved in the effort to join the MCP and HU schools of medicine under the aegis of AHERF would have succeeded in forging a truly consolidated school remains an unanswerable question, one that was precluded by the...

    • 7 Who and What We are: Creating an Organizational Image and Identity
      (pp. 129-145)

      “To learn, to teach, to heal the sick, and to conserve health”: these are the resounding words with which AHERF proclaimed its mission in internal publications and in materials for external audiences such as prospective patients, faculty, students, and donors; for recipients of its corporate giving; and for health care competitors.¹ In perilous times for academic health care centers, it was a health care system that its CEO, Sherif Abdelhak, portrayed as an organization that was “taking charge of the future” in his 1995 lecture at the Association of American Medical Colleges annual meeting. And in 1998, as AHERF and...

    • 8 Consolidation Calendar: Tasks and Timetables
      (pp. 146-153)

      The formal ratification of the consolidation by the AHERF and HU boards initiated an extensive and ongoing series of planning and implementation tasks to meld MCP and HU, to structurally and functionally define and establish its place in the AHERF system, and to assure the financial viability of the health sciences university, particularly the medical school. The myriad of tasks to be undertaken, many of them simultaneously, the absence of much forethought about them before the merger, and the pace at which they needed to be accomplished created an often frenzied and chaotic organizational climate. Discussing the status of the...

    • 9 “Merger Guinea Pigs”: The Medical Students
      (pp. 154-172)

      In anticipation of the arrival of the first cohort of students at the consolidated medical school in August 1995, a host of interrelated planning and implementation tasks had been under way for months. These preparations would not only affect the students but also the school’s faculty, departments, offices and committees concerned with admissions, curriculum, and student affairs, with ramifications into other corners of the university. Three of the principal components of preparing for the MCP-HU matriculants, required in part for accreditation by the liaison Committee on medical education (LCME),¹ were setting the size of the entering class, determining the facilities...

    • 10 Upsizings: Institutional Expansions
      (pp. 173-190)

      The union of MCP and HU brought in its wake a range of institutional expansions in Allegheny university of the Health sciences and the AHERF health care system. in 1992, before the acquisition of HU, AHERF had a relatively small and simple organizational structure: its components were AGH and its Neuropsychiatric Institute and Allegheny-Singer Research Institute; MCP and the medical college hospitals, which included the Eastern Pennsylvania psychiatric institute and suburban Elkins Park and Bucks County Hospitals; and St. Christopher’s Hospital for Children. By 1997 the size of AHERF had grown so great that it had 10 separate boards of...

    • 11 And Downsizings: Institutional Contractions
      (pp. 191-206)

      Concomitant with the organizational expansions examined in the previous chapter, the merger also led to institutional contractions, or downsizings. These downsizings show that a merger should be understood as consisting of processes of mini-mergers, which, like entire combined organizations, can undergo a devolution, or de-merger.

      The contractions set into motion by the MCP and HU agreement included the types of organizational consolidations that could be expected to be part of any academic merger, such as single offices for student and faculty affairs, alumnae and alumni organizations, and admissions; unified boards and faculty governance bodies and bylaws; and combined infrastructure systems...

    • 12 AHERF, AHERF Sat on a Wall; AHERF, AHERF Had a Great Fall (with Apologies to Humpty Dumpty)
      (pp. 209-231)

      For over a year, widening cracks in AHERF’S financial structures had caused the system to totter atop its perch as Pennsylvania’s largest integrated health care delivery system, until it finally imploded and crashed to the ground. the formal beginning of what proved to be its irreparable fall came on July 20, 1998, when its board of directors announced that it had reached a preliminary agreement to sell its nine Philadelphia hospitals for $502 million to a Tennessee-based for-profit company, vanguard Health systems, and voted to seek Chapter 11 bankruptcy protection. The next day, bankruptcy papers were filed with Pennsylvania’s Western...

    • 13 Saving the University
      (pp. 232-251)

      By late summer and fall 1998, the shockwaves induced by the AHERF board’s July 20 decision to file for Chapter 11 bankruptcy protection for its Eastern Region Hospitals and Allegheny University of the Health Sciences, its preliminary agreement to sell the hospitals to Vanguard Health Systems, and the revelation of its estimated $1.3 billion debt in the Philadelphia area had created what the dean later described as a “traumatic stress syndrome” in the medical and other university schools (Barbara Atkinson, interview, December 12, 1998).

      This chapter focuses on the intensive efforts to save the university within the short time frame...

    • 14 No One Could Put AHERF Together Again
      (pp. 252-271)

      The tangled web of matters revealed by AHERF’s Chapter 11 bankruptcy, and the length of time it took to unravel and resolve them, is a complicated story both substantively and temporally, stretching from 1998 through 2003. This chapter highlights issues and actions that emerged during the bankruptcy proceedings from 1998 through 2001. Unraveling the often murky financial operations of Allegheny’s 55 separate legal entities and sorting out the thousands of creditors’ claims, proved to be a gargantuan task, which ultimately cost millions of dollars. It also was an undertaking that triggered a series of investigations; a variety of civil suits,...

    • 15 End Games: 2002–2003
      (pp. 272-282)

      Although the histories of Hahnemann University and the Medical College of Pennsylvania and the fate of AHERF, its other former subsidiaries, and their principals continue to be written, the story that we watched unfold reached its closure in 2002 and 2003. Events during those two years constituted the end of the merger games that began when Allegheny marched into eastern Pennsylvania, sequentially acquired and then merged MCP and Hahnemann, and launched a series of other acquisitions that contributed to its downfall. The major endgames that took place in the final two years of this chronicle were the absorption of the...

  10. Appendix. The Players: People and Organizations
    (pp. 283-286)
  11. References
    (pp. 287-302)
  12. Index
    (pp. 303-307)
  13. Back Matter
    (pp. 308-308)