Date: 10/18/2001

New health system formed in Northwest Indiana with the completion of the acquisition of two local hospitals

Community Foundation, Inc., the parent company of The Community Hospital in Munster, and Ancilla Systems Incorporated, announced today the completion of the acquisition of two Northwest Indiana Ancilla hospitals by Community Foundation.

The new healthcare system will join The Community Hospital, St. Catherine Hospital in East Chicago and St. Mary Medical Center in Hobart. Under the banner, Community Healthcare System, the three not-for-profit hospitals and their many clinics and physician offices will offer a broad network of high quality medical services.

Community Healthcare System will encompass acute-care, sub-acute care, long-term rehabilitation, home health, a senior living community, fitness centers and various community-based health services.

“The integration of the three hospitals will create a multi-site medical network that will be recognized as one of the leading community-based healthcare providers in the region,” said Donald S. Powers, President of Community Foundation. “Community Healthcare System will realize the combined benefits of size and as such will invest its resources in new and enhanced services.”

For the two newly acquired hospitals, an aggressive remodeling and equipment replacement program totaling more than $30 million is anticipated within the next three to five years, Powers said. Plans for capital improvements and service enhancements at all three hospitals are currently under development by the newly created organization.

Today’s announcement signals the beginning of a new relationship between the three acute care hospitals. Thirteen months ago, Community Foundation and Ancilla Systems and its sponsor, the Poor Handmaids of Jesus Christ, began exploring how the two organizations might work together to better service the health care needs of the community. A letter of intent to purchase was signed in November, 2000.

“In a changing healthcare environment, we have recognized the opportunity to reduce costs and increase quality through integration of services and systems,” said Beth Kaminski, President and CEO of Ancilla Systems Inc. “The synergies among the Community Hospital, St. Catherine Hospital and St. Mary Medical Center will better serve the needs of area businesses and residents.”

Community Healthcare System will provide broad market coverage for health care services from the Southern Suburbs of Chicago and across Northwest Indiana. With many outpatient clinics and physician offices, the public will gain greater access to the services of this new system, said John Gorski, Senior Vice President of Hospital Operations for Community Healthcare System.

“Each hospital has unique offerings that can be extended throughout the system and to a larger market," Gorski said. “The three hospitals will work together to improve the community’s access to high quality care, whether that be preventive health services, disease management, highly complex medical procedures or research.”

Leadership for Community Healthcare System will be provided by Community Foundation, renamed Community Foundation of Northwest Indiana, Inc. (CFNI). Four representatives from Ancilla Systems Inc. have been named to the Board of Directors of CFNI, and new positions have been created at the corporate level to oversee the integration of the three not-for-profit hospitals. The Poor Handmaids of Jesus Christ will remain involved in St. Catherine’s and St. Mary’s mission effectiveness and pastoral care programs, continuing their Catholic traditions. Community Hospital will remain non-denominational.

“The Poor Handmaids of Jesus Christ are committed to continuing to serve the citizens of Northwest Indiana through community-based mission activities, with a particular sensitivity to the poor and powerless,” said Sr. Kathleen Quinn, a Poor Handmaid of Jesus Christ and Chairperson of Ancilla Systems Inc.

A transition team, consisting of senior leadership of all three hospitals, has been working since August to develop plans for integration, seeking input from the staff, physicians and the community. No immediate staff or service changes are anticipated at the three hospitals.

“There is a lot to be gained by cooperating, rather than competing and duplicating efforts,” Powers said. “Our goal is to improve the quality of care, reduce healthcare costs, secure a larger market and provide for the continued availability of capital for replacement and growth.”

The acquisition of the two hospitals is being financed through the sale of bonds; terms of the sale will not be disclosed.