Final week, New Mexico-based Presbyterian Healthcare Providers and Midwest-based UnityPoint Well being signed a letter of intent to merge. That is certainly one of many cross-market mergers that well being programs have explored in recent times, and one analyst — Sanjay Saxena, world chief of Boston Consulting Group’s healthcare division — thinks these sorts of bulletins will proceed within the coming years.
However that doesn’t imply the offers might be sealed. A major chunk of those meant mergers will find yourself being referred to as off, although, he stated in a current interview after UnityPoint and Presbyterian introduced their plans.
UnityPoint beforehand had plans to merge with South Dakota-based Sanford Well being, however the $11 billion deal was scrapped in 2019. Now UnityPoint is attempting its hand at a mega-merger once more — its proposed marriage with Presbyterian would outcome within the mixed entity using greater than 40,000 folks, together with about 3,000 physicians and superior apply clinicians.
Each UnityPoint and Presbyterian declined requests for remark. However in a press release the well being programs stated the deal would enable them to make “better investments in scientific excellence, digital innovation, workforce growth and value-based care whereas reducing total administrative prices.”
Final yr, Presbyterian reported an total lack of $370.7 million on revenues of $5.5 billion. The nine-hospital well being system has a mattress capability of 1,017.
UnityPoint Well being operates 20 regional hospitals throughout Iowa, Illinois and Wisconsin, together with 19 group community hospitals. The well being system reported a $441.3 million web loss on a income of $3.7 billion for the 9 months ending September 30.
There have been different cross-market megadeals in current historical past, Saxena identified. For instance, Atrium Well being and Advocate Aurora Well being’s merger which closed in December, created a 67-hospital system throughout components of the South and Midwest. One other massive transaction that closed final yr — between Utah-based Intermountain Well being and Colorado-based SCL Well being — created a 33-hospital system.
Saxena thinks extra hospitals and well being programs will proceed to pursue cross-market mergers. From a regulatory perspective, these offers are extra favorable as a result of they don’t appeal to as a lot consideration from the Federal Commerce Fee on anticompetitive grounds. The need for scale to attain a greater monetary place can be a key motivator for such offers.
“When you have a look at the financials for many well being programs, they’re struggling. And I’m undecided I fully subscribe to this logic, however there’s a sense that if we get greater, we might be stronger and be capable of climate the storm. So there’s inherently a perception that greater is healthier,” Saxena declared.
Many well being programs consider that in the event that they acquire quantity, they’ll be capable of exert extra leverage over payers and suppliers, he added.
Although Saxena thinks extra well being programs will search cross-market offers, he additionally believes that many of those offers might be deserted resulting from well being programs realizing they’re not able to make the sacrifices wanted to reap the advantages of a megamerger.
Individually, different points additionally creep up — comparable to who might be within the C-suite, the place the headquarters might be and who will get the dominant variety of board seats, Saxena identified. However positions — and typically duplicative service traces or packages — have to be lower to ensure that newly merged well being programs to reap the advantages of scale.
“There may be all the time a query of who’s in management after these transactions come collectively. It’s one factor to say you’re going to come back collectively, and it’s one other factor to resolve who’s the acquiree versus the acquirer,” he defined. “I do know typically they attempt to make them equals, however there’s actually no such factor as a transaction of equals. And that’s why co-CEOs don’t work.”
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