Penn Medicine moves to acquire Doylestown Health, and continue expansion

The University of Pennsylvania Health System announced Thursday that it plans to acquire Doylestown Health, a provider in the Philadelphia suburbs.

The University of Pennsylvania Health System says it is exploring the acquisition of Doylestown Health in the Philadelphia suburbs. The organizations announced a letter of intent to come together. (Image credit: Penn Medicine)

The two systems said they have signed a letter of intent to come together, and if they finalize an agreement, Doylestown Health would become a part of Penn Medicine.

Doylestown Health includes Doylestown Hospital and is based in Bucks County, a suburban county that borders Philadelphia, home to Penn Medicine.

Over the past decade, Penn Medicine has expanded its reach beyond Philadelphia into surrounding communities in eastern Pennsylvania and New Jersey. If the deal comes together, Doylestown Hospital would become Penn Medicine’s seventh hospital.

Penn Medicine says the letter of intent is just one step in a process of assessing the potential partnership, which is expected to last for several months. If both sides sign a definitive merger agreement, regulators would still need to approve the deal.

• Read more: Big deals: Looking at the major hospital mergers of 2023

Kevin B. Mahoney, CEO of University of Pennsylvania Health System, said Penn Medicine is looking to expand healthcare options in the region. In a news release, Penn Medicine hailed Doylestown’s top-notch care, as well as its “cutting-edge clinical trials” and “state-of-the-art facilities.”

“From receiving primary care and having a baby to undergoing orthopedic surgery or receiving complex treatment for cancer or heart disease, we want it to be easy for patients to choose Penn Medicine across their lifespan,” Mahoney said in a statement. “We are excited to explore this opportunity with Doylestown Health, which has a strong, historic commitment to patients in the Northern region of the areas we serve.”

Penn Medicine said both systems are committed to serving patients in hospitals and outpatient facilities, as well as in the home and via telehealth.

• Read more: Two Missouri systems complete merger, forming $10B system

James Brexler, president and CEO of Doylestown Health, said in a statement that the system “is deeply committed to maintaining our mission to provide patients the highest quality of care, close to home.”

“As we begin our second century, our boards of trustees are excited about how this partnership with Penn Medicine will further expand Doylestown Health’s ability to deliver clinical excellence and positively impact the health and well-being of the communities we have faithfully served for more than 100 years,” Brexler said.

Penn Medicine and Doylestown have been collaborating for years. Doylestown Hospital has been part of the Penn Cancer Network for more than a decade.

Doylestown has been experiencing financial pressures. S&P Global Rating lowered Doylestown’s credit rating to “CCC” in late 2022 and reaffirmed that rating in April 2023. The rating, by definition, reflects recent violations of financial covenants, but S&P noted Doylestown has made efforts to improve, including the completion of a $100 million capital campaign ahead of schedule.

Penn Medicine operates three hospitals in the city of Philadelphia: the Hospital of the University of Pennsylvania, Penn Presbyterian Medical Center, and Pennsylvania Hospital.

In recent years, Penn Medicine has also acquired Chester County Hospital, based in the Philadelphia suburbs; Lancaster General Hospital, based in Lancaster, Pa., about an hour from Philly; and Princeton Health, based in central New Jersey.

Penn Medicine announced the deal less than a month after another Philadelphia-based health system disclosed plans for a big acquisition.

In December, Jefferson announced plans to acquire the Lehigh Valley Health Network, based in Allentown and serving northeastern Pennsylvania. If regulators approve the Jefferson-Lehigh Valley deal, the combined system would operate 30 hospitals, more than 700 sites of care, and more than 62,000 faculty and staff.

Industry analysts, including KPMG, say they expect to see more hospital mergers in the coming year, with smaller organizations looking to find bigger partners.

Ash Shehata, KPMG’s U.S. sector leader for healthcare, told Chief Healthcare Executive® in a recent interview that some hospitals in the Northeast are facing significant challenges, and some will need partners to stay afloat.

“In the Northeast, where you're seeing more cost pressures, more issues around profitability, you'll likely see more acceleration of closures,” Shehata says. “And even if we don't see closures, you're going to see what are called realignment of services.”