Mercy Hospital will merge with UPMC, according to a letter of intent signed by the… Mercy Hospital will merge with UPMC, according to a letter of intent signed by the Pittsburgh Mercy Health System and Catholic Health East, Mercy’s parent organization, on Wednesday.

UPMC will operate the nearly 160-year-old, 428-bed hospital, which was the first in Pittsburgh, as an acute-care hospital, and it will remain a Catholic entity under the name UPMC Mercy.

Administrator of the Diocese of Pittsburgh, Bishop Paul J. Bradley, said he was happy with the development.

“The announcement can only be greeted with enthusiasm,” Bradley said in a press release. “It means that the hospital will retain its Catholic identity and will continue to operate according to the ethical and religious directives established by the United States Conference of Catholic Bishops.”

Mercy Hospital has lost $42 million over the last three years, according to a press release, and it was projected that they would not be able to continue to provide medical services to the community as they have in the past and to advance their medical technology.

“After studying our options, we determined that a transaction with UPMC was the only solution that achieved all of our objectives and represented an extension of our past successful collaborations with UPMC,” Robert Stanek, president and chief executive officer of Catholic Health East, said in a press release.

As part of the deal, the Sisters of Mercy, members of a national group that sponsor health care, education and community-based ministries, will administer $120 million to maintain and expand their community aid programs.