UPMC planning $900M in capital projects in 2018
UPMC is planning a $900 million capital budget for 2018, which will be partly financed by a $750 million tax-exempt bond issue, a UPMC lawyer said Thursday at a hearing in Harrisburg.
Among the capital projects planned is a 90-bed hospital in South Fayette, which will get $35 million from this bond issue, UPMC treasury attorney Simon L. Goehring said.
He did not provide a breakdown for other projects, but UPMC budgeted $400 million in bond money for construction, according to documents filed with the Pennsylvania Economic Development Financing Authority.
UPMC is in the middle of its biggest expansion since the Pittsburgh health care and insurance giant was formed in 1990.
The Pennsylvania Economic Development Financing Authority conducted the hearing to receive public comment on the UPMC financing, which had been
approved by the authority board last month. The hearing is a required part of the approval process.
The bond issue was the biggest this year for the authority, Executive Director Stephen M. Drizos said.
The authority is a financial conduit, and the public hearing was a routine part of the approval procedure. UPMC bondholders, expected to be large institutional investors, will be exempted from state and federal taxes on bond earnings. The financing is expected to close in October.
In paperwork filed with the authority, UPMC outlined several other projects that the bond money would be used for, including paying off $35 million in bonds held by Mt. Lebanon retirement community Asbury Heights; refunding $45 million in bonds held by Hanover Hospital in Hanover; and covering a $235 million bridge loan to Harrisburg-based Pinnacle Health System, which was used to acquire four hospitals from for-profit chain Community Health Systems, of Franklin, Tenn.
UPMC has been discussing affiliations with Asbury and Hanover, officials from both institutions said.
But refunding the bonds for Asbury and Hanover were not acquisition expenses, said Campbell & Levine LLC lawyer Christopher J. Rayl, who represented UPMC at the hearing.
UPMC also recently reached an agreement to acquire Pinnacle, a seven-hospital system, including the four hospitals acquired from Community Health Systems. That deal is undergoing regulatory review.
At the hearing, the prospect of consumers being shut out of hospitals because of their health insurance card worried AIA Benefits Resource Group Founder Dan Dorsheimer.
Mr. Goehring said UPMC’s newly acquired hospitals would continue to honor insurance provided by Pittsburgh-based Highmark — for now.
Mr. Dorsheimer, whose company is based in Mechanicsburg, said he hoped to avoid confusion in the health insurance marketplace as the result of UPMC’s entry into Central Pennsylvania. “We’re trying to get some kind of feel of any kind of disruption in the market,” Mr. Dorsheimer said. “We would like the people to have access to all facilities.”
In the Pittsburgh area, Highmark members can use UPMC hospitals such as Western Psychiatric Institute and Clinic until June 2019, when a consent decree signed by the two rivals expires. After that, Highmark members are not expected to have in-network access to UPMC facilities.