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Butler Health System approaching agreement with Excela

The Butler Health System Board of Trustees is expected to take action on a final merger agreement with Excela Health before the end of October, according to an official from the health system.

Eric Huss, chief financial officer at BHS, said Wednesday that, should the health system’s board and the board of trustees for Excela Health agree to proceed with the merger, filings for regulatory review will be made at the state and federal levels.

“The due diligence period and appropriate reviews continue on time and as scheduled,” Huss said. “The due diligence process that BHS and Excela (are) working through shows significant opportunity for improvement of both systems over the next five years.”

Butler Health System officials announced in June that the boards of trustees of both organizations had entered into a “letter of intent” to merge the two entities.

Plan impacts ratings

Last week, Fitch Ratings, a financial services company based in New York, issued a rating watch for BHS related to $79 million in revenue bonds. The rating came after the health system reported to Fitch an operating loss of $11.2 million for the 2021 fiscal year. Through the nine months ending March 31, 2022, the system's operating loss was $8.2 million.

According to Huss, Fitch isn’t updating its “A” rating of outstanding BHS bonds until merger discussions with Excela are complete. He also said the rating given by Fitch has no bearing on client experience.

“Fitch wants to see what happens as part of its due diligence process,” Huss said. “BHS has maintained staffing far better than most. It continues to hire and fill vacancies, and it successfully negotiated contracts with its represented nurses and engineers over the past few months.”

Excela Health is a 578-bed, not-for-profit health system in Westmoreland County that includes three licensed, acute-care hospitals — Excela Frick Hospital in Mount Pleasant, Excela Latrobe Hospital in Latrobe and Excela Westmoreland Hospital in Greensburg.

Butler Memorial Hospital is a 326-bed acute-care facility with a broad range of surgical, medical, emergency and psychiatric services. In 2019, BHS was part of a merger that brought Clarion Hospital into its network, which is a 70-bed facility providing 24-hour emergency service among other features.

According to Fitch Ratings, the merger would create a new five-hospital health system with combined board representation and more than $1 billion of total annual revenues.

Huss said the Fitch Rating also reflected the potential of the merger, which was positive.

“To quote Fitch, ‘If the merger is consummated, Fitch believes that there is upside potential for BHS’s outlook or rating,”’ Huss said.

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