D.C. hospital to be run by MedStar; Financially troubled facility on campus of Georgetown University; Two-city strategy; No. 1 in area, operator was created by merger of Helix, Medlantic; Health care


MedStar Health -- already the largest health system in the region with five hospitals in the Baltimore area and two in Washington -- and Georgetown University announced yesterday that they have decided to have MedStar operate Georgetown's financially troubled hospital.

MedStar and Georgetown said they signed a "letter of commitment" yesterday but that a final agreement was several months away.

The deal would represent the next step in the evolution of MedStar, which was formed a little more than a year ago by the merger of Helix Health, based in the Baltimore area, and Medlantic Healthcare Group, operator of Washington Hospital Center, the largest hospital in the District of Columbia. The new parent company took the MedStar name recently and opened a headquarters in Columbia.

MedStar already owns hospitals, physicians' practices, a medical equipment company, a radiation oncology company, a home health care agency and rehabilitation centers. A tie with Georgetown would add one element the system does not have, an academic medical center.

Georgetown has been looking for a partner as its losses mounted. With revenue of $468 million, the Georgetown Medical Center lost $62.4 million in the fiscal year that ended June 30. The year before, it lost $57 million. (The Medical Center includes the hospital, medical school and nursing school. Georgetown does not report separate financial figures for the hospital.)

Academic medical centers have been affiliating with community hospitals in order to help assure a flow of patients for complex procedures. Earlier this year, Maryland General Hospital joined the University of Maryland Medical System. Last year, Howard County General Hospital merged into Johns Hopkins Medicine.

"This will help Georgetown to rebuild its market share, and will allow Washington Hospital Center to build the strength of its teaching and research programs," said Nelson Sabatini, a vice president of the University of Maryland Medical System. Sabatini said the deal also is a sign of further consolidation between the Baltimore and Washington health markets. MedStar's five Baltimore-area hospitals are Church, Franklin Square, Good Samaritan, Harbor and Union Memorial.

MedStar has clearly been pursuing a two-city strategy. At the time of the merger agreement, John P. McDaniel, chief executive officer, said, "We'll use Helix as an anchor in Baltimore and Medlantic as an anchor in Washington, and will fill in from both ends of the Parkway."

The Rev. Leo J. O'Donovan, S.J., president of Georgetown University, said the arrangement was "very attractive because it preserves our academic quality, supports our Catholic and Jesuit identity, and makes sound financial sense."

Under the proposed affiliation, Georgetown would continue to run its medical and nursing schools. MedStar would operate the hospital, which is on the Georgetown campus, and Georgetown's off-campus centers and physicians' practices.

The hospital would continue to follow Roman Catholic guidelines. Good Samaritan is also a Catholic hospital.

Georgetown University Hospital is licensed for 535 beds. MedStar's current system is licensed for 2,300 acute care beds and has annual revenue of $1.5 billion.

The deal would guarantee that the hospital remain open and remain a teaching hospital. Georgetown's medical students -- it graduates about 200 a year -- would be able to get training at other MedStar facilities, exposing them to more varied patients. It is not expected that the partnership would change the Hopkins and University of Maryland residency programs at MedStar's Baltimore hospitals.

Pub Date: 3/26/99

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