Penn Medicine plans to acquire Doylestown Hospital, expanding its reach in Bucks County

The University of Pennsylvania Health System intends to acquire financially stressed Doylestown Health, a deal that would strengthen the nonprofit health system’s reach in Philadelphia’s northern suburbs, officials said Thursday.

Doylestown Health, centered on its 247-bed hospital in Bucks County, would be Penn’s seventh hospital. Reaching a final agreement could take months, and then the deal would have to get regulatory approvals.

Adding Doylestown fills in a gap in Penn’s geographic coverage and secures referrals for its high-level care in University City. The deal also gives Penn a new platform for getting advanced care into communities, said Kevin Mahoney, CEO of Penn’s health system.

“Patients want to come to Penn Medicine, but it’s not an easy place to get to,” said Mahoney, referring to Penn’s flagship Hospital of the University of Pennsylvania.

If the preliminary deal is completed, Doylestown would open a new front in Penn’s competition with Jefferson Health, the region’s largest health system by hospital beds. Jefferson’s Abington Hospital draws patients from the Doylestown area. If Jefferson completes its proposed acquisition of Lehigh Valley Health Network, to the north of Doylestown, Penn could have a strong presence in the middle of Jefferson territory.

Doylestown Hospital, which celebrated its 100th anniversary last year, has long placed value on remaining independent and keeping services local. COVID made clear how vulnerable the non-profit health system was financially, said Jim Brexler, CEO of Doylestown Health.

“We need great organization to be a part of, and who better to be a part of than Penn Medicine,” he said.

Penn doctors already work closely with those at Doylestown, where it has had a radiation oncology treatment center since 2011 and sees about 400 patients a year.

Doylestown had $418 million in revenue last year, compared to $10 billion for Penn’s health system. In addition to its three hospitals in Philadelphia — the Hospital of the University of Pennsylvania, Pennsylvania Hospital, and Presbyterian Medical Center — Penn also owns Princeton Medical Center in Plainsboro, N.J.; Chester County Hospital in West Chester; and Lancaster General Hospital in Lancaster.

In 1895, a group of women formed the Village Improvement Association of Doylestown to promote the health and beauty of the town, according to a presentation last May on the organization’s history.

The group didn’t always succeed — a bid to rid the town’s public spaces of spittoons failed — but the VIA, as it is known, opened in October 1923 what is now Doylestown Hospital. The nonprofit VIA still owns the hospital.

Committees made up of VIA members ran the hospital until 1960, when the VIA hired the hospital’s first professional administrator.

When Richard Reif was hired as the second person in that job, the hospital was at a crossroads, with the board needing to decide if Doylestown was going to be a community hospital and triage center that sent complicated cases to Abington Hospital or to Philadelphia medical centers, or if it was going to offer more advanced services, Reif said in May.

The board decided to offer more advanced services, such as cardiac catheterization, which is used to diagnose and treat heart problems. Doylestown was the first hospital in Pennsylvania to offer cardiac catheterization without offering traditional heart surgery, said Brexler, the third CEO in its history, in May.

Doylestown’s tendency to spend on programs and facilities that allow patients to get care close to home contributed to a relatively heavy debt load. Its finances were vulnerable when the COVID-19 pandemic hammered hospital finances by canceling elective services.

“The COVID experience showed how critical we were to our community because we did everything for our community and didn’t flinch,” Brexler said. “But it also sucked the underbelly of financial support right from under us and showed us just how vulnerable we were.”

The organization’s cash reserves fell by a third between the end of 2018 and July of last year, while expenses like labor costs rose sharply, according to a presentation by Doylestown’s chief financial officer last summer. That left the Doylestown with just 60 days of cash on hand, down from about 170 in 2018.

The system wasn’t profitable enough in recent years to meet the terms of its loan agreements and had to renegotiate terms with lenders. It still has low credit ratings from Moody’s and Standard & Poor’s, but finances are improving, Brexler said.

Penn wants to see better financial results from Doylestown before the deal closes. “We’ve seen improvement over the last several months, and we think that trend will continue,” Mahoney said.

During discussions about the potential deal with Penn, Brexler tried to convince VIA board members to think differently about the future.

“We can no longer be just fiercely independent. We have to be fiercely protective of the mission we’re serving,” he told them. “What will it take to make sure that this mission that these ladies started 100 years ago actually is there.”