Hospital Central Services, Inc. History

Company Perspectives:

Unsurpassed customer service is so much more than just words on paper at HCSC. It's 1,200+ employees all working together to deliver innovative, cost-effective solutions to our customers' needs. Everyone in this organization--operating from nine locations, working with directors on our four corporative boards and various divisional committees--has the same dedication to giving our customers service that can't be matched anywhere else. Combined, they deliver quality programs and services to hospitals and other healthcare organizations at cost levels designed to help them deliver excellent patient care. For more than 30 years, this mission has served us and our customers well.

Key Dates:

1964:

Lehigh Valley, Pennsylvania, business associates incorporate the Greater Lehigh Hospital and Health Planning Council.

1967:

Hospital Central Services Corporation (HCSC) is incorporated.

1969:

HCSC-Group Purchasing, HCSC-Credit and Collections, and HCSC-Blood Center are incorporated.

1970:

HCSC-Laundry goes into operation in Allentown, Pennsylvania, and Hospital Central Services, Inc. is incorporated to promote education and provide a centralized oversight for the various HCSC affiliates.

1971:

HCSC-Blood Center (Miller Memorial Blood Center) opens.

1982:

HCSC-Enterprises, Inc. is formed to permit HCSC Credit Services to offer healthcare collection services in the commercial (for-profit) marketplace.

1984:

Health Care Financial Systems is created as a collection service for hospitals and physicians.

1992:

HCSC-Group Purchasing and HCSC-Laundry become Hospital Central Services Cooperative, Inc.

2001:

Keystone Community Blood Bank is merged with HCSC operations.

Company History:

Working through a group of separately incorporated affiliates, Allentown, Pennsylvania-based Hospital Central Services, Inc. offers an array of programs and services to healthcare providers in Pennsylvania and New Jersey. Included are HCSC-Laundry, the nation's largest not-for-profit linen rental service; HCSC-Purchasing, which contracts bulk purchasing of supplies for its members' facilities; HCSC-Financial Services, which offers a fee collection service for its members; and the HCSC-Blood Center, which operates the Miller Memorial Blood Center and the Keystone Community Blood Bank. The organization is also a member affiliate of the Mid-Atlantic Group Network of Shared Services (MAGNET), founded in 1979, which provides HCSC and other member affiliates with contract portfolios of cost-reducing services, equipment, and other commodities. Operating through four corporate boards and a variety of divisional committees, HCSC is structured as a cooperative, not-for-profit organization. While maintaining that status, the cooperative has awarded grants to a variety of community and educational organizations.

1964-71: A Cooperative Is Formed

The evolution of Hospital Central Services, Inc. began in 1964, when a group of Lehigh Valley, Pennsylvania, business leaders created the Greater Lehigh Valley Hospital and Health Planning Council. Its aim was to plan for providing adequate hospital and other medical support facilities in the Lehigh Valley area, for improving patient care and education at these facilities, and for coordinating the development of them in order to avoid unnecessary and costly duplication of services and programs.

Three years later, in 1967, the Council incorporated Hospital Central Services Corporation (HCSC). Its first aim was to provide linen rental and laundry services to the non-profit, tax-exempt hospitals in the Lehigh Valley area, but it quickly added other goals. In 1969, it incorporated HCSC-Group Purchasing and HCSC-Credit and Collections. The former affiliate's purpose was to provide centralized purchasing services for area healthcare facilities; the latter's purpose was to provide collection services for those same agencies. Another affiliate, HCSC-Blood Center, was also incorporated in 1969. In 1970, to oversee the operations of these affiliates, the Council incorporated Hospital Central Services, Inc.

The first HCSC-Laundry went into operation in June 1970, in Allentown, Pennsylvania. It immediately began servicing the linen supply and laundry needs of ten founding hospitals, which signed 15-year contracts with HCSC, allowing the company to finance the start-up. In the next year, the HCSC-Blood Center began operating at the Samuel B. Miller Memorial Blood Center, providing the Lehigh Valley area with its first centralized site for the collection, processing, and storage of whole blood, plasma, and other blood components. The idea behind the community blood bank had evolved from many gifts given in memory of the late Samuel W. Miller, the popular and esteemed editor and publisher of The Morning Call, Allentown's chief newspaper. The center was built on the grounds of the Muhlenberg Hospital Center in Bethlehem, Pennsylvania. Initially, the Miller Memorial Blood Center began providing the blood needs and services for six area hospitals.

Soon after HCSC-Group Purchasing was incorporated, it started offering primary vendor contracts to all of the hospitals represented by the Greater Lehigh Valley Hospital and Health Planning Council. Contracts, which covered medical, surgical, pharmaceutical, nutritional, laboratory, and office products, provided a cost-saving and efficient means of supplying each hospital's needs. Meanwhile, in 1970, HCSC-Credit & Collections started its bad-debt recovery service for these same hospitals. Its primary aim was to protect their image and at the same time provide an efficient means of recovering funds lost through patients' non-payment for services rendered them.

1972-91: Expansion and New Services

Over the next decade, the number of hospitals and other health care units in some way dependent on HCSC continued to grow. By 1981, more than 70 hospitals were using one or more of its services. While only a few hospital subscribed to the whole range of HCSC services, each of the company's divisions had increased the number of its clients. For example, by 1981 the HCSC-Laundry was servicing 19 hospitals in Pennsylvania and New Jersey, nine more than it had initially serviced. Through the 1980s and into the 1990s, the growth in its client base and the geographical range that it covered figured importantly in HCSC's expansion in both some of its services and its facilities.

In the 1980s, HCSC enhanced its range of services by creating a couple of new corporations. The first of these, HCSC-Enterprises, Inc., created as a for-profit, taxable entity, was formed in 1982 to permit HCSC Credit Services to provide healthcare collection services in the for-profit marketplace, extending such services to individual physicians, emergency medical services (EMS), and other healthcare providers. Two years later, in 1984, HCSC introduced Healthcare Financial Systems as a billing service for hospitals and physicians, and, somewhat later, for non-profit EMS providers, including municipally owned or operated ambulance and fire departments.

Meanwhile, HCSC's established divisions were rapidly expanding. Laundries, in particular, grew quickly. Although it was not until 1986 that HCSC-Laundry opened its second laundry plant, located in Greensburg, Pennsylvania, some 50 miles southeast of Pittsburgh, others soon appeared, including two in 1989. One of these was located in Kingston, Pennsylvania, just north of Wilkes-Barre, while the other one, formerly the Mid-Atlantic Laundry Plant, opened up in Camden, New Jersey.

Meanwhile, the Samuel W. Miller Memorial Blood Center (MMBC) was both attracting an increasing number of donors and expanding its services. In 1981, when it celebrated its tenth anniversary, MMBC collected 22,431 units of blood. The next year, using a new blood bag preservative, it was able to extend the shelf life of blood from 21 to 35 days. By 1986, the year after it first started donor scanning for the HIV antibody, MMBC surpassed the 100,000 blood-unit donation mark, and in that year alone recorded over 35,000 donations. With the increase in volume, in 1987, HCSC-Blood Center opened its first branch, located on Cedar Crest Boulevard in Allentown, and its first satellite location at Slate Medical Center in Bangor, Pennsylvania. The following year, HCSC-Blood Center established a second satellite, at Quakertown Community Hospital; it also began using a new blood bag preservative with a 42-day storage capability and broke ground at the site of a new MMBC at the Lehigh Valley Corporate Center. That new 29,000 square-foot facility opened in 1990.

The number of hospitals and healthcare organizations in a partnership relationship with HCSC had risen to over 100 by 1991. That year, the HCSC-Group Purchasing members contracted for over $135 million in purchases through that agency, while HCSC-Financial Services realized over $21 million in placements and $5 million in collections and Miller Memorial Blood Center processed over 74,000 blood components used by the ten hospitals affiliated with the program.

1992-99: Restructuring and Continued Expansion

In 1992, HCSC underwent a restructuring when the boards of HCSC-Group Purchasing and HCSC-Laundry opted to elect a subchapter T tax status. Its aim was to reward its clients. In accordance with subchapter T of the Internal Revenue Code, HCSC-Laundry, HCSC-Group Purchasing, and HCSC-Credit & Collections merged as Hospital Central Services Cooperative, Inc., a Pennsylvania, non-profit corporation. HCSC, Inc. was then able to offer participating hospitals patronage dividends, paid in cash and scrip, while realizing tax savings for itself.

Several other new developments marked the 1990s. In 1993, HCSC purchased a self-contained bloodmobile coach to collect donated blood at sites unable to accommodate bloodmobiles because of restricted space or an excessive number of donors. Also, for the first time, MMBC was licensed for collecting blood in New Jersey when the Hackettstown Community Hospital became its ninth affiliate.

A new spurt in the growth of HCSC-Laundry's operations began in 1997, when it purchased its fifth laundry plant, a previously owned laundry cooperative in Pittsburgh. The size of the acquired facility allowed HCSC to phase out its Greensburg operation early the next year, when it transferred it linen service to the Pittsburgh plant. However, it was again operating five laundries when, later in that same year, 1998, it acquired one more laundry processing plant, this time in Scranton, Pennsylvania.

In 1999, the HCSC-Blood Center entered an agreement with two other Pennsylvania blood banks: the Central PA Blood Center in Hummelstown and the Keystone Community Blood Bank in Reading. Their purpose was to explore a possible affiliation and the potential for sharing services for achieving increased blood recruitment and more efficient use of the region's existing supply of blood.

2000 and Beyond: Poised for Continued Growth

The new decade started well for the cooperative. By the end of June 2000, HCSC-Group Purchasing's contracts had gone beyond the $2 billion mark in the purchase of various goods and services, and through the beginning of 2001, HCSC was still successfully maintaining operations at its five laundries located in Camden, New Jersey, and in Pennsylvania sites in Allentown, Kingston, Pittsburgh, and Scranton. Also, during 2001, HCSC's Group Purchasing Division introduced its contract catalog on CD-ROM, and its Pharmacy Program, in an affiliation with Shared Services Healthcare in Atlanta, first made its contract portfolio accessible on the Internet. The cooperative also added 43 new contracts to that portfolio during the year.

The Miller Memorial Blood Center, meanwhile, was providing whole or partial blood products to 21 hospitals and healthcare providers in eight countries, and was, by 2001, manufacturing over 80,000 blood components per year. Also, in addition to its main facility in the Lehigh Valley Corporate Center, the Blood Center had in operation three blood-donor satellite facilities, located in Allentown and Bangor, Pennsylvania, and Newton, New Jersey. In March 2001, MMBC achieved a much coveted ISO 9002 certification, becoming only the fourth not-for-profit community blood service to attain that distinction. Also, a month later, HCSC announced the imminent merger of the Keystone Community Blood Bank of Reading into its operations. Keystone, established in 1966, was providing blood and blood products to hospitals in Berks County, Pennsylvania, and at the time of the merger was garnering over 11,000 blood donations per year.

All in all, over HCSC's 2001 fiscal year, the cooperative provided services to more than 400 healthcare organizations throughout the Mid-Atlantic region, increasing the organization's revenues to $67.3 million, a 1 percent growth over the previous year. On the cooperative's drawing board were plans for many new developments, including additional laundry sites, more commitments to educating the public through additional awards to community organizations, and a growth in it contract portfolio affiliations. Some of these goals were realized in 2002, as another laundry facility was established in Baltimore and grants were awarded to a variety of community organizations. Demand for blood and blood products peaked at MMBC following the terrorist attacks of September 11, 2001, as the HCSC affiliate was tapped to provide blood products for victims of the tragedy. Extensive costs incurred for staffing and supplies during this chaotic time were offset by a grant. As it looked to the future, HCSC, led by President and CEO J. Michael Lee, remained committed to focusing on good customer relations, because, as the company's annual report for 2002 noted "The bottom line for our customers may be profitability, but they continue to find great value in HCSC flexibility, responsiveness and dependability."

Principal Divisions: HCSC-Laundry; HCSC-Group Purchasing; HCSC-Financial Services; Samuel W. Miller Memorial Blood Center.

Further Reading:

• Csencsits, Sonia, "Miller Memorial, Berks Blood Center Merge," Allentown Morning Call, May 2, 2001.
• "Imation Corp. Signs Agreement with Magnet, Inc.," PR Newswire, July 16, 1998.
• "Instrumentation Laboratory Secures Primary Supplier Agreement with MAGNET," PR Newswire, January 4, 1999.
• "Mid Atlantic Group Network of Shared Services, Inc. Signs Agreement with Trek Diagnostic Systems, Inc.," PR Newswire, April 28, 2000.
• Rohland, Pamela, "Nonprofit Supports Hospitals with Plethora of Services," Eastern Pennsylvania Business Journal, January 1, 1998, p. 18.
• "Stealing Surgical Garb and Picking Up a Bridge, Cheap," New York Times, January 26, 1986, p. 57.
• "Wave of Thefts of Surgical Suits," New York Times, September 7, 1986, p. 26.

Source: International Directory of Company Histories, Vol. 56. St. James Press, 2004.