Magee Rehabilitation Hospital has entered a preliminary agreement to become part of Thomas Jefferson University, Jefferson told its bondholders Friday.
Magee, founded in 1923, was part of the former Jefferson Health System, which was dissolved when Thomas Jefferson University Hospitals and Main Line Health decided in 2014 to go their separate ways.
Magee and Jefferson have continued working together, Magee president and chief executive Jack Carroll said.
"We have a lot of umbilical cords attached. They help us with our biomedical equipment. They run our pharmacy for us. They run our respiratory therapy for us. They interpret our X-rays. We have a residency program together. We do research together," he said.
"We're going to explore what more we can do together, how close can we get together."
Thomas Jefferson University includes the former Abington and Aria Health systems, acquired in the last two years. Deals to add Philadelphia University and Kennedy Health System in South Jersey are pending. Jefferson also controls Rothman Orthopedic Specialty Hospital in Bensalem.
With $59 million in net patient revenue in fiscal 2015, Magee is the smallest of the three rehabilitation hospitals in the Philadelphia region, according to data from the Pennsylvania Health Care Cost Containment Council. Main Line Health's Bryn Mawr Rehabilitation Hospital had $80 million in revenue that year, and Einstein's MossRehab was the largest with $113 million in net patient revenue.
Magee was less profitable than those competitors, with an average total margin of 8.6 percent in the three years ended June 30, 2015, compared with 20.4 percent for Bryn Mawr and 20.3 percent for MossRehab, the state data showed. However, Magee has no debt.
Carroll said Magee has lower profit margins because it treats more complicated patients. "By any measure that you can find where you benchmark against other hospitals, we have the highest acuity of anybody in the nation -- in other words, how sick our patients are and how involved they are," he said.
One of the factors is the lack of scale that its competitors benefit from as part of larger systems.
Carroll said there was no time line for deciding whether to complete a deal. "We've got an 18-member board, and they've got to be convinced that they want to do this again," he said.