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Our Lady of Victory Hospital in Lackawanna will remain open, but with a major new tenant and a far different medical mission, the Catholic Health System announced today.

OLV will no longer be a full-service hospital. Instead, the Catholic Health System will consolidate its acute-care services two miles away at Mercy Hospital in South Buffalo.

It will move all rehabilitation services into OLV, including care of head trauma patients. OLV also will offer eye care, outpatient treatment of intestinal disorders, physician offices, and an urgent-care center, instead of an emergency room, for minor ailments.

The major piece of the new arrangement involves giving the OLV building to its next-door neighbor, Baker Victory Services.

Baker Victory intends to use most of the space for a $13 million expansion to treat adolescents and adults with emotional and psychiatric problems and to care for the frailest developmentally disabled children.

Officials of the religiously affiliated hospital network, which is beset by financial losses, said the deal is the best they could come up with to preserve both OLV and nearby Mercy Hospital.

"This is a good solution, something we worked hard at," said Dale St. Arnold, president and chief executive officer of the health system. "We achieved the goals we set for ourselves as best we could."

He estimated the Catholic Health System will save $12 million a year by not operating two full-service hospitals two miles from each other in the Lackawanna-South Buffalo community.

Hospital officials previously projected that OLV would lose $1.5 million in 1998 and Mercy as much as $8.5 million.

The savings, St. Arnold said, will allow the hospitals to break even this year.

Total employment at OLV and Mercy will decrease, and many workers will move to new positions.

Officials estimated they will retain about 85 percent of the Mercy and OLV patient-care workers and 50 percent of the hospitals' support staff. However, they held out the prospect that with the expansion of Baker Victory Services, overall employment in the community could increase.

Baker Victory's expansion is expected to create 301 jobs, officials said, although many of the new positions at Baker Victory come with different requirements from those at the hospitals. There may be more jobs overall but no guarantee they will go to laid-off employees at Mercy and OLV.

St. Arnold said the shift of all hospital services to Mercy will create the need for 476 more positions at the Abbott Road hospital. Positions will be filled based on seniority within the Catholic Health System, not individual hospitals, according to an agreement worked out recently with the 10,500 workers throughout the health system.

The health system, which formed in 1997, also includes Sisters and Kenmore Mercy hospitals, St. Joseph Hospital in Cheektowaga and Genesee Mercy Healthcare in Batavia.

"We know that things must change, that it will be difficult, and that our members will deal with it. Our key concern is that we remain employed in comparable jobs," said Barbara Bauch, president of Local 1133, Communication Workers of America, which represents nurses at Mercy.

OLV is a nonunion hospital.

She said any decision on the fate of OLV and Mercy, in some respects, comes as a relief.

"This is not a criticism. But we've been waiting for so long that the anxiety has built up to a point where a part of you just wants to get the process over and move on," Ms. Bauch said.

It's estimated the changes at OLV and Mercy will cost $8 million and will occur over the next 18 months, starting in mid-1999 with the shift of all medical rehabilitation services from Mercy to OLV, St. Arnold said.

The cost will include renovations to Mercy's critical care units and the purchase of new patient telemetry equipment to avoid Year 2000 computer problems.

OLV will continue to operate as a hospital during the transition, officials said.

Hospital industry observers praised the plan.

"Everyone didn't get everything they wanted. But there's something there for just about everyone except those who would criticize any change from the status quo," said William Pike, president of the Western New York Healthcare Association.

"They had to save money and reduce hospital capacity," he added. "But they did it in a way that didn't focus solely on dollars."

The much-anticipated decision was made amid stiff public opposition to closing OLV, an 80-year-old institution co-founded by the late Rev. Nelson Baker, Lackawanna's famous Padre of the Poor and a candidate for sainthood.

Baker Victory Services also traces its roots to Father Baker. The agency, which is part of the Catholic Diocese of Buffalo but independent of the Catholic Health System, began as a small mission in the 1850s for orphaned or abandoned children. As needs grew, an orphanage arose that later became saddled with debt.

Father Baker took over management in 1882 and expanded services into the institution known commonly in the region as "Father Baker's."

Baker Victory Services today employs 800 people and offers a smorgasbord of programs, including adoption and prenatal care to needy women.

Currently, the organization cares for more than 2,500 children, adolescents and their families each year.

It plans to use about 60 percent of OLV primarily in three ways: adolescent and adult psychiatric care, daytime programs for children with severe disabilities and others with mental health problems, and residential treatment services for children and adolescents.

The arrangement calls for Baker Victory to obtain the building debt-free. It will continue to be called OLV Hospital.

The Catholic Health System will pay its share of utilities and maintenance costs, officials said. The health system also will remain responsible for paying off the bonds used to build the hospital.

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