The University of Maryland Medical System closed a deal Friday to take ownership of a Prince George's County hospital system so plagued with financial and image problems that two-thirds of county residents went elsewhere for care.
The university medical system announced that it has completed an agreement to take over Dimensions Healthcare — which includes two hospitals, an ambulatory care center and two health and wellness centers. Under the agreement, a new entity was created called University of Maryland Capital Region Health.
As part of the deal, which took nearly seven years to complete, a new hospital will be built in Largo to replace the flagship Prince George's Hospital Center in Cheverly. Groundbreaking on the new facility is expected later this year with a planned opening for 2021.
Robert A. Chrencik, president and CEO of UMMS, called the deal a milestone and the dawn of a new era.
"The real significance is for Prince George's County and the 900,000 people who live there and the two-thirds who leave the county for health care," he said. "It is a disservice these folks aren't getting the quality care they deserve. The real significance over time will be just revitalizing that whole health delivery system."
A spokesman for Prince George's County Executive Rushern L. Baker III said patients in the county as well as Southern Maryland would now have access to better health resources.
"Since taking office, the Baker Administration has been committed, engaged, and successful in increasing the reach and range of county health care providers and options," spokesman Scott L. Peterson said in an e-mail. "The merger of the University of Maryland Medical System and Dimensions Healthcare System is a critical element in achieving a holistic, high quality healthcare system and a necessary antecedent to the construction of our new regional medical center in Largo."
Joshua Nemzoff, a consultant on hospital mergers and acquisitions, said the deal was a win for everyone involved. Prince George's has a high percentage of insured residents who will generate revenue if the reputation of the University of Maryland can persuade them to come back for care, he said.
"They are joining a very large, high-quality system that is well capitalized," Nemzoff said. "They have been a hospital that was distressed for a long time. Hooking up with a vey high quality system like Maryland is probably a great situation for everybody, especially for the consumer."
Prince George's Hospital Center had suffered losses for years because of mismanagement and a patient base that included many uninsured people. It received tens of millions of dollars in subsidies from the state and county to operate but still amassed significant debt. As part of the deal to take over the hospital, the University of Maryland Medical system refused to take on the debt and pension liabilities of the old system.
The state and county will continue to provide financial help to the new system for several years with each providing $15 million in operating costs through fiscal year 2019. They will provide $5 million each in fiscal year 2020 and 2021. The state will also provide an additional $10 million over 10 years for patient services and to help offset potential operating losses as the new system builds its business.
The state, county and university medical system will split the costs to build the $543 million flagship hospital in Largo almost evenly, according to medical system officials.
The deal marks the end of a process that began in 2010 with early discussions between the medical systems and state and county government officials. A year later, the University of Maryland Medical System signed a memorandum of understanding to come up with a comprehensive plan for improving health care in the county.
It was a slow and tedious process to complete the deal. Funding for the project became a sticking point and political disagreements erupted between Gov. Larry Hogan and the Democratic leadership of the General Assembly.
The merger is the latest by UMMS, which has been taking ownership of smaller community hospitals throughout Maryland for the last several years. The health system employs 25,000 people and is affiliated is with 4,000 physicians at more than 150 locations and 14 hospitals. The reach of its hospitals now spans most of the state, including Baltimore, the Eastern Shore, Southern Maryland and the Baltimore and Washington suburbs.
Dimensions employs 2,500 people.
Under Friday's agreement, there are also plans to replace Laurel Regional Hospital and turn it into a free-standing medical facility with a focus on outpatient treatment. Laurel political officials initially opposed a plan to take away full-service hospital services. But after the University of Maryland Medical System increased collaboration with the community on the plan, some residents said they welcomed becoming part of the medical system.
"I am glad that they are finally here," said Laurel Mayor Craig Moe. "In my view it is long overdue. I know they will do a great job when they come here, and I am looking forward to working with them."
A 2011 study of the health needs of Prince George's County residents by the University of Maryland School of Public Health found higher rates of chronic disease such as diabetes and asthma. It also found the county had fewer health care providers than surrounding areas.
UMMS administrators hope to address many of these health disparities. Its doctors have alreday been providing some services in the county. For example, University of Maryland doctors run the emergency medicine operations, including the trauma center in Cheverly, the second-busiest in the state. University of Maryland School of Medicine faculty helped rebuild the cardiac surgery program at the facility.
Nemzoff said increasing the volume of patients will help significantly improve the hospital's financial picture.
Chrenick said changes won't happen overnight, but he hopes to improve care over the long-term.
"It will take time, but I think the community can have confidence that things are going to be different," he said.