Gundersen, Marshfield Clinic to remain independent after calling off merger plan

After several months of collaborative discussions on how they might come together to enhance care quality across Wisconsin, northeast Iowa and southeastern Minnesota, Gundersen Health System and Marshfield Clinic Health System have decided to call off their merger talks and remain independent.

The organizations said they will continue to "individually focus on improving healthcare access in rural areas," and will do so through telehealth services, the enhancement of critical access hospitals and clinics in small communities, and recruiting and retaining clinicians to practice in rural areas, among other initiatives.

Gundersen and Marshfield will also continue to partner on current initiatives, like the Wisconsin National Community Oncology Research Program (which seeks to improve patient access to cancer clinical trials) and the Wisconsin consortium of the NIH's All of Us precision medicine research program, led by the Marshfield Clinic Research Institute.

WHAT'S THE IMPACT

The proposed merger had been highlighted by consulting firm Kaufman Hall as a mega-merger that would represent one of the biggest transactions of 2019.

Mega-mergers are defined as transactions in which the seller has $1 billion or more in annual revenue. Gundersen Health System fits that mold with total revenues in the neighborhood of $1.2 billion. Marshfield Clinics boasts roughly $466 million in total annual revenues.

THE LARGER TREND

In 2018, Marshfield Clinic Health System reported first quarter losses of $17 million, due to lower reimbursement to its health plan from the lack of Affordable Care Act reinsurance and cost-sharing reduction payments, according to its first quarter report.

The Trump Administration stopped paying insurers the cost-sharing reduction payments, which payers used to help qualified consumers pay deductible and out-of-pocket costs.

The negative impact was partially offset by a $2.4 million reduction in ACA health insurance taxes, the report said. Payer mix shifts and increased supply costs within the care delivery division also hindered earnings, and the system incurred $2.6 million in costs related to the implementation of a new revenue cycle system.

For the first quarter of 2018 -- the three months ending in December 2017 -- Marshfield had an operating deficit of $17 million, or 3%, compared to an operating margin of $2.9 million, or .6% for the same time period in 2017.

Earnings were $8.8 million, or 1.5%, in comparison to $21.2 million, or 4%, in 2017.
Yet Marshfield reported total revenues of $576.8 million for the three months ended Dec. 2017, representing an increase of 8.4%, or $45 million, compared to the same time period in the previous year, the result of the acquisition of the Marshfield Medical Center on June 30, 2017.

ON THE RECORD

"This was an opportunity we had to explore. Yet, we have to make the right decision for our patients and for our organizations," said Dr. Scott Rathgaber, Gundersen Health System CEO. "We each still have a commitment to delivering the best care possible to those we serve. We will continue to improve the health of our communities, while working to reduce the cost of care and offering an outstanding experience for those in our care."

"We are thankful to Gundersen for coming together with us to have these discussions. Bringing two entities together of our size and scope is an incredibly complex process, and first and foremost in that process is making sure it was the best path forward for our patients, staff and communities," said Dr. Susan Turney, Marshfield Clinic Health System CEO. "While we mutually decided to remain independent, we will continue to execute our strategy of smart growth as we look for opportunities to ensure residents across rural Wisconsin have access to excellent health care close to home."

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com