Aspirus, St. Luke's inch closer to 19-hospital affiliation
The combined organization would operate 19 hospitals and 130 outpatient locations with nearly 14,000 team members, organizations say.
Photo: Martin Barraud/Getty Images
St. Luke's, based in Duluth, Minnesota, and Aspirus Health, based in Wausau, Wisconsin, have taken a step closer to merging by signing a definitive agreement to create a formal affiliation, which would result in a new 19-hospital health system.
The proposed affiliation intends to expand rural access to healthcare and advance quality of care for residents of northeastern Minnesota, northern and central Wisconsin, and the Upper Peninsula of Michigan.
This follows the July 12 announcement that the organizations had signed a letter of intent.
WHAT'S THE IMPACT?
Under the terms of the definitive agreement – which was unanimously approved by the boards of directors of both nonprofit organizations – the organizations would collectively focus on a number of specific areas.
For one, Aspirus will invest at least $300 million over eight years to fund St. Luke's strategic projects. It will also commit to implementing Epic and other standard systems to promote integration and efficiency within 24 months of closing.
Also, Aspirus Health Plan will expand into St. Luke's Service Area within two years following closing – ostensibly to promote coordinated, cost-efficient, and effective healthcare delivery, the organizations said.
All six unions at St. Luke's have extended their support, signing letters saying they believe the affiliation is in the best interest of their members and the community. In addition to honoring all physician, labor and union contracts, the definitive agreement includes retaining, integrating, and providing additional opportunities to all St. Luke's employees, according to the organizations.
The combined organization would operate 19 hospitals and 130 outpatient locations with nearly 14,000 team members, including 1,300 employed physicians and advanced practice clinicians. The system will operate headquarters in Wausau, Wisconsin, and maintain a corporate office in Duluth, Minnesota.
The next steps include state and federal regulatory reviews, including an upcoming community meeting with the Minnesota Office of the Attorney General. Pending regulatory approvals, the organizations hope to complete the affiliation in spring 2024.
THE LARGER TREND
Financial challenges spurred about a third of the hospital and health system merger and acquisition activity in the third quarter of this year, found a new Kaufman Hall analysis posted this week.
The analysis found continued activity among systems with annual revenues in the range of $250 million to $750 million that have sought a partner. What is new in recent quarters is the number of larger systems – those with annual revenues of $1 billion or more – that also are citing financial distress as a driver for their decision to partner.
While partnership, merger and acquisition activity is returning to pre-pandemic levels, regulatory scrutiny of these transactions is also increasing. New proposed merger guidelines were issued by the Federal Trade Commission (FTC) and the Department of Justice (DOJ) in July.
While the guidelines determine a merger's effect on competition in industries ranging from food and agriculture to healthcare, they are expected to impact the latter as health system M&A continues to climb back to pre-pandemic levels.
ON THE RECORD
"I'm grateful for the support we've received as we've continued through this affiliation process with our like-minded partner St. Luke's," said Matt Heywood, Aspirus president and CEO. "Together, we will continue to evolve the way we care for our patients, especially those in rural areas, who will have the opportunity to access the same high level of care as patients in other parts of the country. We look forward to working with regulators on the approval of the affiliation."
"For more than 140 years, we've taken great pride in caring for this region," said Eric Lohn, St. Luke's co-president/CEO and chief financial officer. "With the challenges facing the healthcare industry, including St. Luke's, we believe that now is the time to affiliate. We are confident that Aspirus is the right partner to help us further grow and continue providing the best level of care for the next 140+ years."
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
