UPMC plans to move headquarters to largest building Downtown
Tuesday, April 10, 2007

By Dan Fitzpatrick, Pittsburgh Post-Gazette

The University of Pittsburgh Medical Center's pending move from Oakland to the city's largest office tower Downtown is about more than the basic need for space. It also symbolizes the evolution of what was a small medical school into what is now the largest employer in Western Pennsylvania, with more than 40,000 people at its command.

UPMC Chief Executive Officer Jeffrey Romoff, the person who charted that rise, will officially announce the crosstown move this morning at U.S. Steel Tower, site of UPMC's new Grant Street headquarters. Confirming the decision yesterday with a brief press advisory, the hospital conglomerate hailed the consolidation of corporate and administrative functions Downtown as a sign of "UPMC's commitment to the city and the community."

UPMC will likely take several floors -- one real estate source said yesterday that UPMC could start with 200,000 square feet and grow to as much as 400,000 square feet over a period of years -- and plant its sign somewhere on the blackish-gray tower built for U.S. Steel Corp. in 1970.

During negotiations with the landlord, UPMC was said to have discussed the placement of its logo atop the 64-story building, visible for miles around. It was not known yesterday whether the landlord had agreed to that step; the property manager and leasing agent both declined comment.

Today's announcement, though, does end plenty of speculation within the real estate and medical communities about the ultimate location of UPMC, a $5.7 billion nonprofit that made a "profit"-- excess revenue over expenses -- of $523 million in 2006 and continues to grow at a torrid pace, swallowing land and other hospitals. In the last 15 months alone, UPMC spent $13 million acquiring properties surrounding its Hillman Cancer Center in Shadyside, preparing for a possible expansion of 300,000 square feet, while supervising construction of the 900,000-square-foot, $575-million Children's Hospital in Lawrenceville.

It also is awaiting federal and state approvals of a $120 million merger with Pittsburgh Mercy Health System -- a deal that would give the largest employer in southwestern Pennsylvania access to more than half the hospital market in Allegheny County. A Federal Trade Commission spokesman confirmed yesterday that the agency recently asked UPMC and Mercy for more information -- indicating a heightened level of scrutiny.

Both the FTC and the Pennsylvania Attorney General's Office are looking into possible antitrust issues.

No one knows how long the reviews will take.

"It is a waiting game right now," said Mercy spokeswoman Shannon Adam. "Unfortunately, there is nothing we can do to speed up the process. It is out of our hands."

A UPMC rival, West Penn Allegheny, continues to rail against the merger, arguing that it would drive up health-care costs in the region.

"UPMC's aggressive acquisition of Western Pennsylvania hospitals over the past 10 years constitutes nothing less than an attempt to monopolize the provision of health care services in this region," said Dan Laurent, a spokesman for West Penn Allegheny.

UPMC monopoly, he added, would "adversely impact the competitive position of businesses in the community and stunt business growth via higher health-care costs. We are gratified that the FTC is taking concerns over this proposed merger seriously and closely examining its potential implications for our region."

West Penn Allegheny's opposition puts the shoe on the other foot in a long-standing adversarial relationship that saw UPMC challenge West Penn's merger with Allegheny General nearly a decade ago.

UPMC notes that it is not unusual for the FTC to make such requests for additional information. "We remain confident that this review will culminate in a merger that benefits Mercy, its employees and the health care consumers of this region," it said in a statement.

A spokesman for the state attorney general's office could not be reached for comment.

This is good news for the downtown real estate market. I know office vacancy has been high in the golden triangle, so this would really help.