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ARNOT OGDEN MEDICAL CENTER AND ST. JOSEPH'S HOSPITAL SIGN INTEGRATION AGREEMENT


Arnot Ogden Medical Center and St. Joseph's Hospital, both non-profit hospitals, have signed a formal integration agreement to consolidate into a regional healthcare system serving the communities of the Twin Tiers region of New York and Pennsylvania.

The agreement is pending final regulatory approval including the approval of a Certificate of Need, which was submitted to the New York State Department of Health on January 4, 2011. Until the Certificate of Need is approved, Arnot Ogden Medical Center will enter into an interim management contract with St. Joseph's Hospital and coordinate day-to-day operations.

"This partnership is a tremendous opportunity to improve access to high-quality healthcare across the region and build on the strengths of both organizations," stated Dr. S. Jan Eberhard, Chairman of Arnot Ogden Medical Center's Board of Managers. He added, "Patients will be better served for years to come as a result of this partnership."

"When we signed the initial Letter of Intent with the Arnot Ogden Medical Center this past fall, we hoped to finalize an agreement that would optimize the benefits to all constituents involved, St. Joseph's, Arnot Ogden Medical Center, and, most importantly, our combined community," said Don Hartman, Chairman of the St. Joseph's Hospital Board and President/CEO. "With the signing of this final integration agreement, we have surpassed even our most optimistic expectations, with the biggest winner being the community we serve. My personal congratulations go to all who contributed to this rigorous process."

The new three-hospital regional healthcare system will have combined revenues in excess of $380 million and employ nearly 2,900 individuals. In 2009, the hospitals recorded more than 18,000 inpatient and 400,000 outpatient visits. The three-hospital system currently has licensed beds totaling 809, including 493 acute care, 231 long term care, 40 physical medicine rehabilitation, 25 psychiatric, and 20 substance abuse rehabilitation.

In August, Arnot Ogden Medical Center and St. Joseph's Hospital signed a Letter of Intent, thereby clearing the way for formal discussions. That step was followed by a period of due diligence on the part of each organization, and the development of terms under which the two would join together. The boards of the two organizations gave final approval of the agreement in December 2010.

Anthony J. Cooper, President and CEO of Arnot Health stated, "We have a lot of work ahead of us. However, I am optimistic that integrating with St. Joseph's Hospital will provide the residents of our 6-county service area with high-quality healthcare and improved access to needed services."

Under the integration agreement, Arnot Ogden Medical Center and St. Joseph's Hospital, as well as their affiliates and services, will integrate operations into a non-profit corporation that will serve as the active parent of the regional healthcare system. The parent corporation will be governed by a Board of Directors comprised of members from the existing governing bodies of Arnot Ogden Medical Center, St. Joseph's Hospital and Ira Davenport Memorial Hospital, in Bath, New York. Ira Davenport Memorial Hospital previously joined Arnot Ogden Medical Center in January, 2010 and is operated under a similar management agreement as St. Joseph's Hospital is now entering with Arnot Ogden Medical Center.

The Board of Directors will be ceded certain reserve powers from the existing corporations and will have authority to approve and interpret the statement of mission and philosophy of the corporation, approve the strategic plans, capital and operating budgets of the hospitals and their subsidiaries and approve all borrowing or lending of funds. Dr. S. Jan Eberhard will serve as the initial Chairman of the Board of the corporation and Anthony J. Cooper will be the initial President and Chief Executive Officer.

Arnot Ogden Medical Center, Ira Davenport Memorial Hospital and the parent corporation will remain secular and St. Joseph's Hospital will remain a Catholic Hospital and operate in accordance with the Ethical and Religious Directives for Catholic healthcare service. Bishop Clark, the Bishop of the Diocese of Rochester, has reviewed and is in agreement with the terms.

The proposed design of the regional healthcare system includes the merging of certain administrative and management services and the reconfiguration of inpatient and outpatient services. All three acute care hospitals will continue to operate under the proposed plan. While the parent corporation is expected to be formally created in 2011, it could take up to three years to fully integrate.

The next step in consolidation is obtaining New York State Department of Health approval. New York's Certificate of Need process governs the establishment, construction, renovation and major medical equipment acquisitions by healthcare facilities, such as hospitals, nursing homes, home care agencies, and diagnostic and treatment centers. The Certificate of Need process is designed to monitor and approve investments in healthcare facilities capacity and major investments.

In October 2010, in anticipation of the consolidation, New York State Department of Health awarded $20 million to St. Joseph's Hospital and Arnot Ogden Medical Center through the New York State Healthcare Efficiency and Affordability Law for New Yorkers Capital Grant Program Phase 19 (HEAL). The award will now be applied to reducing debt at St. Joseph's Hospital and connecting St. Joseph's Hospital to Arnot Health's industry-leading information technology infrastructure.

Founded in 1908 by the Sisters of St. Joseph of Rochester, New York, along with several community leaders, St. Joseph's is a not-for-profit Catholic acute care hospital with a certified capacity of 295 beds and 150 physicians from over 40 specialties.

Arnot Ogden Medical Center is an independent, not-for-profit, 256-bed tertiary medical facility with more than 300 physicians from over 50 specialties. Arnot Medical Services (AMS), a subsidiary of Arnot Health, is a 150+-provider, multi-specialty medical practice with offices conveniently located throughout the Twin Tiers.

The Davenport & Taylor organization was founded in 1910 and joined Arnot Ogden Medical Center in 2010, is comprised of a 38-bed acute care hospital, a 120-bed skilled nursing facility, and a full complement of ancillary services. It is located in the Finger Lakes region of New York State between the villages of Bath and Hammondsport.

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