Ascension, Providence St. Joseph Health halt merger talks
Two systems cited focuses on other areas of operations that muddied the waters for the merger, making it a no-go.
Ascension and Providence St. Joseph Health halted their merger discussions with no immediate plans to resume, according to a report in the Wall Street Journal which cited people familiar with the discussions.
While the sources said Providence is focused on improving its financial performance and boosting investments in digital, retail and ambulatory healthcare, Ascension is focused on its new strategic plan to bolster growth and labor productivity, a reason cited for why the merger's timing was bad, the report said.
Ascension's new strategy is the product of pressures from payers who want to cut reimbursement rates as well as an ever-evolving healthcare space where consumers are flocking to lower cost care options like urgent care centers, according to a transcript of Ascension's Chief Executive Anthony Tersigni in an employee briefing session cited by the WSJ.
Operating margins have been on the decline and the system has cut executive pay, adjusted nursing staff and plans to cut $61 million in administrative costs next year, according to that transcript.
Ascension Michigan also recently laid off at least 500 employees and is expected to cut its local market workforce by a total of 600 jobs, the report said.
Ascension's system spans 22 states and the District of Columbia and now touts 153 hospitals after recent acquisitions, including a merger with Presence Health which became official earlier this month.
The merger with Providence would have broadened Ascension's reach into the West Coast and Southwest. Providence operates 51 hospitals in seven states, including Alaska, California, Montana, New Mexico and Oregon, where Ascension does not have a presence, according to the report.
Providence Health & Services and St. Joseph Health System merged in 2016.
The Ascension merger with Providence St. Joseph stalls as plenty of other mergers continue to drive record M&A activity. Fellow systems Dignity Health and Catholic Health Initiatives are in talks to merge and major Philadelphia players Jefferson and Einstein Health have also inked a non-binding letter of intent to merge, among others. Loyola Medicine grabbed up Tenet's last Chicago hospital and Ascension actually recently signed a letter of intent to offload its Connecticut Hospital St. Vincent's.
A recent Bloomberg report said the beginning of 2018 has seen unprecedented merger and acquisition activity, with tallies around $156 billion in deals thus far and major deals in the works that could drive that upward even more.
But mergers come with a very large and complex set of headaches and hurdles, and can end up costing systems money especially in the short term. They require the undivided attention of system leadership, so the call on the Ascension/Providence merger is likely well-founded considering the beheamouth system it would have created.
Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com
