Since implementation of the Affordable Care Act, an increasing number of hospital mergers took place in recent years with more expected to follow.
Dignity Health, which operates Mercy, Methodist and Memorial hospitals in Sacramento, CA, announced in December that it will be merging this year with Colorado’s Catholic Health Initiatives (CHI), creating a hospital system that will employ roughly 159,000 employees at more than 700 care sites and 139 hospitals.
CHI, based south of Denver, has hospitals in 17 states and Dignity operates facilities in 22 states, including U.S. HealthWorks and other brands. CHI and Dignity said they have no overlapping hospital areas and there are no plans to close any facilities. The merger would create a single Catholic nonprofit health system based in Chicago.
After the merger, which is awaiting regulatory approval, the single health system will be run by CEOs of both companies: CHI’s Kevin E. Lofton and Dignity’s Lloyd Dean. A new name has not yet been chosen for the new enterprise, the leaders said, but one will be announced in the second half of 2018, when approvals are expected to be final from federal, state and church officials.
Merging healthcare organizations often believe they can achieve new efficiencies because of their economies of scale, but some healthcare analysts have said that the mergers don’t always lead to big savings. But mergers do increase bargaining power, allowing them to negotiate higher rates from insurers than they could command as smaller entities. However, Dignity Health officials pointed to a 2016 study by the American Hospital Association that says mergers can increase quality while reducing costs.
Also in December, Advocate Health Care in Illinois and Wisconsin-area Aurora Health Care announced plans to merge later this year to create Advocate Aurora Health, the 10th largest not-for-profit, integrated healthcare system in the U.S., serving nearly three million patients annually.
The new organization will operate 27 hospitals, more than 500 sites of care, employ more than 3,300 physicians and nearly 70,000 associates and caregivers. The Advocate and Aurora names will remain and each system will maintain its current headquarters.
With combined annual revenues of approximately $11 billion, both the Advocate and Aurora Boards of Directors approved the plan, which will build on the 20-year relationship the two health systems have had through the joint ownership and operation of ACL Laboratories.
The agreement is subject to state and federal regulatory review and approval in Illinois and Wisconsin. The agreement includes a plan for a single Board of Directors comprised of members from both systems. Also, CEOs Jim Skogsbergh of Advocate and Nick Turkal of Aurora will serve as co-CEOs when the two companies merge.
Meanwhile, the two non-profits Ascension and Providence St. Joseph Health have been in talks for months as they too consider a merger that would create the largest owner of U.S. hospitals — 191 in total under one operator. The combined organizations would have hospitals in 27 states and annual revenue of $44.8 billion, based on results from the most-recent fiscal year.
Currently, the largest U.S. hospital operator is HCA Healthcare Inc., which owns 177 hospitals and posted revenue of $41.5 billion in 2016.
St. Louis-based Ascension is the largest nonprofit health system in the U.S. and the world’s largest Catholic health system. It operates 141 hospitals and more than 30 senior living facilities in 22 states and the District of Columbia.
Providence St. Joseph Health, based in Renton, WA, is a nonprofit Catholic healthcare system operating 50 hospitals in five states.
