LAWRENCEVILLE -- St. Francis Health System appears to be preparing to dismantle its 137-year-old hospital in Lawrenceville.

Several sources confirm that the struggling health system plans to file a petition in the Orphan's Court Division of the Court of Common Pleas by mid-August. The filing would effectively dissolve the St. Francis Health System and place ownership of its trio of hospitals under the control of several different entities.

Once St. Francis enters receivership, a plan is expected to be presented to the state court that would relieve St. Francis of its debt obligations by transferring ownership of St. Francis Medical Center to Children's Hospital of Pittsburgh.

The deal comes as UPMC and Highmark Inc. hammer out a new contract that would ensure Highmark's 2.1 million local members access to UPMC hospitals. St. Francis' troubles reached a crisis just as the question of how to build a new Children's Hospital became more pressing.

In acquiring Children's last year, UPMC promised it $250 million to build or renovate a new pediatric hospital. The acquisition was hotly contested by Highmark and other health insurers, which contended in lawsuits that UPMC would gain a monopoly in local pediatric hospital services.

Highmark was successful in getting language added to the deal that ensured equal access to the hospital.

While St. Francis officials are keeping quiet about the health system's future, recent actions indicate the end is near. A high-ranking St. Francis hospital official was told to make other employment plans because the hospital is expected to cease operations -- possibly as soon as Sept. 30, according to one source.

Orphan's Court has exclusive jurisdiction in cases involving charitable nonprofit corporations. After the petition is filed, the court would then appoint a "receiver" -- comparable in responsibilities to the duties of a bankruptcy court trustee -- who would ultimately determine how assets of the nonprofit should be distributed among creditors.

In addition, several sources confirm that Bishop Donald Wuerl of the Catholic Diocese of Pittsburgh has supported a deal that would divest St. Francis of its Lawrenceville property. Formal approval from the diocese is not necessary, however, because the health system is owned by The Sisters of St. Francis of Millvale, an independent nonprofit corporation. Permission to dissolve the organization has to come from the religious group's superiors in Rome, according to St. Francis board member the Rev. Lawrence DiNardo of the diocese of Pittsburgh.

St. Francis spokeswoman Shirley Freyer would not comment on St. Francis' plans other than to say the board is meeting "as needed" to discuss the future of the institution. "Anybody who is involved with whatever is being discussed signed confidentiality agreements," she said.

The three-member board has been busy "trying to figure out ultimate outcomes, which haven't been yet determined," said Rev. DiNardo.

All told, St. Francis Health System has 2,350 employees with about 1,500 employed at the St. Francis Medical Center in Lawrenceville. About 300 are employed at its hospitals in Cranberry and another 500 in New Castle.

Jameson Health System, which operates a competing hospital in New Castle, said it was in discussions to take over the St. Francis Hospital of New Castle. The two facilities are located about a mile apart.

Facing rising debts and mounting operating losses, St. Francis began exploring the possibility of partnerships in May 2001.

In 2001, St. Francis posted an operating loss of $70 million, which followed a $71 million loss in 2000.

Children's Hospital spokeswoman DeAnn Marshall said that its 20-member board has not yet approved the deal. "There is interest in St. Francis, but there is, as yet, no deal."

She said, however, that there are several benefits to the Lawrenceville site that are attractive to the board.

She said that a freestanding pediatric medical campus would allow room for future expansion, along with more parking than what is currently available in Oakland. The construction schedule would also be shortened by several years as the St. Francis site would be vacated opposed to building around existing clinical operations.

The ultimate decision as to whether Children's would take over St. Francis has to be approved by Children's board.

"An outside entity can't decide on our behalf," Ms. Marshall said. The next board meeting for Children's is slated for Oct. 22.

UPMC's board would also have to approve the deal.

Ms. Marshall said fund-raising efforts for the new hospital are gearing up. "We're moving toward a capital campaign, but there's no target date or (goal) amount identified yet," Ms. Marshall said.

Originally, the hospital was to be located on the site of the UPMC Montefiore campus, about a block from Children's current location.

Ms. Marshall pointed out that Children's original 400-page contract with UPMC did not specify that a new facility had to be built, but intended some UPMC facilities to be renovated to accommodate pediatric medicine.

"The potential exists for the same to be true at St. Francis," Ms. Marshall said. "It could be a combination of new construction as well as renovation."

Many in the health care community say they will not be at all surprised if St. Francis closes its Lawrenceville hospital. They say the hospital can't make it financially and there's simply too much competition for St. Francis.

Sources contend that the Lawrenceville site makes sense for UPMC because it would eliminate one of its competitors. In addition, the new location would reduce some traffic congestion in Oakland.

While Highmark Inc. would not comment on the plans, a statement released in June by Highmark and UPMC regarding the contract that expired June 30 indicated that the two parties have reached an agreement in principal.

The statement said that the two parties could work together on some joint health care initiatives that will reportedly benefit members of the community.