Minnesota AG uses new law to review two proposed health system mergers

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Minnesota Attorney General Keith Ellison is using a new state law to review two proposed hospital mergers to determine whether they are in the public's interest.

One involves the 25-hospital system that would be created by the merger of Essentia Health and the Marshfield Clinic Health System.

The other would unite St. Luke's Duluth and Aspirus Health health systems.

Both proposed mergers were announced in July.

WHY THIS MATTERS

In May, Governor Tim Walz signed into law New Requirements for Certain Health Care Entity Transactions.

The law gives the attorney general additional authority to review healthcare transactions and to seek court intervention if the AG believes the healthcare transaction is not in the public's interest. 

As part of his office's review, Ellison is seeking public input at two upcoming meetings. 

"Every Minnesotan deserves high-quality healthcare that they can afford, access, and depend on, and every Minnesotan deserves the opportunity to provide input on healthcare transactions that affect them," Ellison said by statement. "As I review these mergers to ensure they comply with state and federal law, I want to hear from the public, because Minnesotans' thoughts and concerns are an essential part of our review." 

On July 27, Essentia and Marshfield announced they had signed a letter of intent to form a new integrated regional health system serving rural and mid-urban communities across four states. 

The organizations said they planned to come together formally by the end of this year pending regulatory approval.

Essentia Health is an integrated health system headquartered in Duluth, serving patients in Minnesota, Wisconsin and North Dakota. It has 14 hospitals. Marshfield Clinic Health System, headquartered in Marshfield, Wisconsin, serves patients primarily in central and northern Wisconsin and Michigan's Upper Peninsula, primarily through its 60 Marshfield Clinic locations and 11 hospitals. 

By joining together, Essentia and Marshfield Clinic will combine the strengths of both organizations and advance the level of care in Wisconsin, Minnesota, Michigan's Upper Peninsula and North Dakota, the organizations said. The new regional system will bring greater access to primary, specialty and hospital care through a diverse network of 3,800 providers and 150 sites of care, including 25 hospitals.

"We are both physician-led organizations with an unwavering commitment to the health of rural communities," said Essentia Health CEO Dr. David Herman, who will serve as chief executive officer of a new parent company. "Our complementary capabilities will allow us to learn and share with one another to better achieve our collective mission."

"Discussions the past few months have made it clear that this is an incredible opportunity to enhance both health systems, solidify our futures, and take patient care and services to an even higher level," said Dr. Susan Turney, who previously announced plans to step down as Marshfield Clinic Health System CEO this fall. "It represents an opportunity to expand access to care, diversify the services we provide and deepen our community-based work."

Turney and Herman added that through the combination both organizations will be better positioned to navigate current and future challenges to healthcare – especially rural healthcare – and preserve the sustainability of high-quality care in our communities.

In May, Marshfield Clinic reported a $32.6 million operating loss for the first quarter, according to Becker's. Salaries, contract labor and benefits expenses accounted for 41.5% of total expenses. The negative financial results were also driven by costs related to inflation and the One System EHR implementation, the report said, citing Marshfield's filing.

St. Luke's Duluth and Aspirus Health announced on July 12 that they had signed a letter of intent to merge their hospital systems. 

St. Luke's Duluth is a nonprofit healthcare system based in Duluth, Minnesota, that serves patients in northeastern Minnesota, northwestern Wisconsin and the Upper Peninsula of Michigan. It has two hospitals.

Aspirus Health is headquartered in Wausau, Wisconsin, serving patients in upper Michigan and central and northern Wisconsin. It has 17 hospitals.

THE LARGER TREND

A growing body of evidence shows that consolidation in healthcare provider markets has led to increases in prices without clear evidence of increases in quality, according to an August KFF report. 

Policymakers and regulators have historically focused on consolidation within the same geographic area, but there have been a large number of mergers and acquisitions between hospitals and health systems that operate in different regions, including several multibillion-dollar deals over just the past couple of years, KFF said. 

Some experts have raised concerns that cross-market mergers could result in hospitals and health systems raising their prices. It is also possible that cross-market mergers could result in the elimination of service lines by some acquired hospitals, which may reduce access to care, the report said.

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org