Hospitals, News, Healthcare

Provider consolidation continues with Intermountain merging with Sanford Health

If the merger is approved, the combined health system would operate 70 hospitals and employ 89,000 people. Intermountain CEO Dr. Marc Harrison would lead the new system, estimated to generate about $15 billion in annual revenue.

Photo: Natee Meepian, Getty Images

Utah-based Intermountain Healthcare and South Dakota-based Sanford Health plan to merge in 2021, creating a 70-hospital system.

If approved, the merger would combine the 24-hospital Intermountain Healthcare and 46-hospital Sanford Health to create a massive organization. In addition to the 70 hospitals, the combined organization would include 435 clinics and provide senior care in 233 locations. Both organizations offer health plans, and together, they would insure about 1.1 million people.

This continues the recent trend of provider consolidation and will likely continue as Covid-19 has severely hit hospital finances heavily reliant on elective procedures forcing them to look for scale. Earlier this month, two North Carolina-based systems, Atrium Health and Wake Forest Baptist Health combined to create a 42-hospital system expected to generate more than $32 billion annually.

The combined system would generate about $15 billion in total annual revenue, a Sanford spokesperson said via email. Intermountain’s total revenue for the first three months of 2020 was $2.3 billion and it incurred a $1 billion loss, while Sanford’s total revenue for the first six months of 2020 was $3.1 billion and it gained a profit of $95 million, recent financial filings of the two organizations show. But, it’s important to note that Intermountain’s loss is mostly attributable to losses on investments, “much or all of which was probably made up by June or July as the markets recovered,” Allan Baumgarten, an independent health markets analyst, said via email.

Intermountain Healthcare’s president and CEO, Dr. Marc Harrison, will serve as the combined system’s leader, which will employ more than 89,000 people.

Kelby Krabbenhoft, Sanford Health’s president and CEO, will serve as president emeritus of the new system. The existing board of trustees from both systems will also join to form a combined board.

In an Oct. 26 news release, Dr. Harrison said that the two nonprofit organizations have a “shared vision of the future of healthcare” and aligned values.

“This merger enables our organizations to move more quickly to further implement value-based strategies and realize economies of scale. Through coordinated care, increased use of telehealth and digital health services, we will make healthcare more affordable for our communities,” Dr. Harrison said in the statement.

In turn, Sanford hopes to “improve the health and well-being of the communities we serve and strengthen our impact in healthcare delivery and value,” Krabbenhoft said in the news release.

Baumgarten provided a variety of reasons for why hospitals are going down the M&A road.

“Hospital systems are still setting growth as their chief strategic goal — in multiple dimensions: total revenues, geographic reach, facilities and patient counts,” Baumgarten said via email. “Some are rethinking the size of their footprint in inpatient facilities and making new investments in small facilities (such as Ascension). Some are rethinking their strategy for locating outpatient services (like Fairview and HealthPartners) and concluding that it’s not efficient to have a clinic every five miles and are closing some of those facilities.”

If all goes to plan, the combined health system will be headquartered in Salt Lake City, with corporate offices in Sioux Falls, South Dakota. For the time being, both organizations will operate under their current names. The merger is expected to close next year, pending federal and state approvals.

The latest merger news from Sanford Health, the largest nonprofit rural health system in the nation, comes after a failed attempt last year.

The system announced plans to merge with West Des Moines, Iowa-based UnityPoint Health in June 2019 but by November, the plans fell through, according to the Sioux City Journal.

Photo: Natee Meepian, Getty Images