Fox Chase Cancer Center will become part of the Temple University Health System, officials announced Thursday.
The combination, which is expected to close next summer, will join two prominent Philadelphia health-care institutions, both of which have faced fiscal difficulties lately.
Temple, based in North Philadelphia, will get a nationally recognized research partner that could help it compete with other academic medical centers in the region. Fox Chase, which will keep its name, will get a bigger referral base for patients, room to expand at Temple's Jeanes Hospital next door, and a chance to save money as health-care reform further squeezes the dollars available for clinical care and research.
The CEOs of the two institutions, who spoke at a news conference Thursday afternoon at Temple's medical school, used the word historic to describe their union. Outside health-care experts agreed with them.
"It is a blockbuster," said Alan Zuckerman, president of Health Strategies & Solutions in Philadelphia. It is big news, he said, for Fox Chase to give up its independence and for Temple's cancer program to go from "nothing to world-class in 60 seconds. . . ."
"It is in many ways a very remarkable development, and it is a sign of the times," he said, adding that he expected to see a national wave of unusual mergers.
While the alliance has the potential to improve cancer care in the region, Zuckerman said the tricky part, and one that causes many marriages of this sort to founder, would be merging the two corporate cultures effectively.
Larry Kaiser, president and CEO of the Temple system, described the agreement as a "win, win, win" for patients and both institutions.
Fox Chase CEO Michael Seiden, who said he would be staying on, called the affiliation "logical, additive, synergistic." He said his primary concern in deciding on the deal was whether it would "help us prevail over cancer."
Fox Chase and Jeanes will share a 47-acre campus. Fox Chase, which has made several unsuccessful attempts to expand, will grow by taking over about 30,000 square feet of unused clinical space at Jeanes, which is next door and linked with Fox Chase by a bridge.
Fox Chase's 100 double rooms will eventually be transformed into 100 single rooms at the two hospitals. Jeanes currently operates 176 patient beds.
Temple, which treated nearly 1,300 cancer patients in 2009, will invest $9.4 million in cancer research and will assume Fox Chase's debt, though officials wouldn't say how much that was. They said they had not yet calculated the total cost of the deal, and Kaiser declined to say how much additional debt Temple expected to take on.
The merger still faces some regulatory and financial approvals.
As one of the nation's first specialized hospitals for cancer, Fox Chase has a long and storied history. It and the University of Pennsylvania's Abramson Cancer Center hold the National Cancer Institute's highest designation: comprehensive cancer center, a measure of both clinical care and research. Thomas Jefferson University's Kimmel Cancer Center is an NCI cancer center, the next step down.
Temple and Fox Chase already collaborate on some services, such as doctor training and bone-marrow transplants. They have been in talks for several months about affiliating.
Fox Chase sees about 8,000 new patients a year. Temple's three hospitals - Temple, Episcopal, and Jeanes - total more than 1,000 beds.
Fox Chase will add 2,500 employees to the Temple system's 6,500.
Both institutions face financial challenges. Temple's North Philadelphia location attracts large numbers of Medicaid patients, who generate less revenue than patients with private insurance. After a crippling nurses strike, the system reported operating losses of $48 million in fiscal 2010, but was slightly in the black for the year ended in June.
Fox Chase made $2.4 million in 2010 on revenue of $338.7 million. And it earned $4 million last year.
Temple University Hospital's chief executive officer, Sandy Gomberg, stepped down last week and was replaced by an interim administrator, John N. Kastanis, a manager at Navigant, a consulting firm. Kaiser, a surgeon, became head of the health system and dean of Temple's medical school eight months ago.
Unlike most cancer centers, Fox Chase is a freestanding institution, unaffiliated with an academic medical center and the more powerful network of referrals they provide. Its location, in the Northeast, well away from major highways, is also a challenge. Fox Chase recently gave up on its primary plan to expand - growing into Burholme Park next door - after courts sided with neighbors who opposed the move.
Gerald Katz, an independent health-care consultant, said he thought the deal was "fabulous from both standpoints" and will also benefit Jeanes by making better use of the building.
Zuckerman said the addition of Fox Chase to its system could help Temple recruit top doctors and researchers.
"It gives them a world-class clinical and research center," he said, "that they can leverage for its halo effects."