Sentara Healthcare, Cone Health call off affiliation

Photo courtesy of Sentara Healthcare

Sentara Healthcare and Cone Health have decided not to move forward with an affiliation that was initially proposed in August of last year.

Leadership from each organization began the work of combining the two entities earlier this year, and it was during that process that leaders from both entities decided that their respective communities and stakeholders required support that was better served by Sentara and Cone remaining independent, the groups said in a statement this week.

The Sentara Healthcare board of directors and the Cone Health board of trustees came to the mutual agreement to end affiliation plans late last week.

Both Sentara Healthcare and Cone Health are nonprofit integrated healthcare systems focused on patient choice, affordability and access.

"I am confident that this mutual decision will not alter either organization's ongoing commitment to meet the needs of our respective communities," said Howard P. Kern, president and CEO of Sentara. "Sentara and Cone Health remain aligned and in agreement that our first priority is to those we serve, and we believe this will be better done as independent organizations."

WHAT'S THE IMPACT?

The merger, had it gone through, would have created a health system bringing in an estimated annual revenue of $11.5 billion. No cash would have been involved in the transaction, the idea being that combined reserves and assets would have allowed the organizations to spend more on new projects.

Sentara Healthcare is an integrated, nonprofit system encompassing 12 hospitals in Virginia and northeastern North Carolina. It employs more than 1,200 physicians and advanced-practice clinicians, and 30,000 team members. It operates hundreds of sites of care. Sentara's Optima Health Plan and Virginia Premier Health Plan serve 858,000 members in Virginia, North Carolina and Ohio.

Cone Health is a nonprofit, integrated network consisting of five hospitals in North Carolina. The system employs more than 13,000 people, including nearly 1,200 physicians and advanced-practice providers. It operates more than 100 care sites. Its Medicare Advantage health plan, HealthTeam Advantage, serves 15,000 members.

THE LARGER TREND

At the time of the announcement, the systems said they were "strongly aligned," with a keen focus on expanding on their value-based care models, increasing their integrated health insurance options, building technology platforms to increase patient access points (both digitally and virtually), growing community impact to create meaningful change, and "ultimately tackling the toughest challenges in healthcare."

The combined organizations would have looked to save costs by reducing redundancies in duplicate back office roles, such as finance and IT services.

Despite the cancelled plans, hospitals, health systems and providers, both for-profit and nonprofit, are expected to see continued robust merger and acquisition activity throughout the year, Moody's Investors Service found in April. Larger health systems will pursue M&A to increase market share and to diversify, in terms of both geography and service lines.

Smaller providers, meanwhile, have felt the COVID-19 pandemic exact a toll on their financial performance and will likely pursue M&A to gain access to clinical, strategic and financial resources. They'll also want to reduce labor, supply and information technology expenses.

Mergers and acquisitions are picking back up after a tumultuous 2020, but overall M&A activity didn't take as big of a hit as revenue and operating margins. Transaction volumes were down from the norm, but only slightly, suggesting the public health crisis may be strengthening the rationale for future partnerships.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com