Atrium Health, the parent company of Wake Forest Baptist Medical Center, said Wednesday it plans to merge with Advocate Aurora Health of Downers Grove, Ill., creating the fifth-largest nonprofit health care system in the United States.
The proposed transaction is subject to approval by state and federal regulators, which could be completed by the end of the year.
With purchases in North Carolina, Alabama, Georgia, Illinois, South Carolina and Wisconsin, the combined organization would serve 5.5 million patients and operate more than 1,000 practices and 67 hospitals. It would have more than 7,600 physicians, nearly 150,000 employees and annual revenue of more than $27 billion.
Wake Forest University School of Medicine would be the academic core of the combined entity. Winston-Salem medical school is establishing a second campus in Charlotte. Wake Forest would be the only medical school in the system.
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“The Aurora Advocate has some affiliations, but it's not directly affiliated with a medical school in the sense that we do,” Atrium said.
“The world of healthcare as we know it is changing at a rapid pace — and is rapidly becoming more digital, personalized, scientific and complex,” said Eugene Woods, president and CEO of Atrium.
“This strategic combination will allow us to deepen our commitments to health equity, create more jobs and opportunities for our teammates and communities, launch new game-changing innovations and more.”
As is typical of a major merger, especially one involving publicly traded companies, the systems have agreed on three main reasons for consolidation.
Atrium has agreed to adopt Advocate Health as the brand name for the combined system, while continuing to use Atrium as a trademark in its markets.
The system will be based at Atrium's headquarters in Charlotte with major operations centers in Chicago and Milwaukee. Milwaukee would get a new institute for health equity.
Perhaps the most significant deal is that Woods and Advocate chairman and CEO Jim Skogsbergh would serve as co-CEOs for the first 18 months, after which Skogsbergh would retire and Woods would remain as CEO.
The combination, if approved, would likely boost total annual compensation for both Woods and Skogsbergh.
In February, Atrium revealed that Woods' total compensation rose 24.3% to $9.83 million in fiscal 2021. He received a 7.1% salary increase to $3 million, a 38.5% jump in bonus to 3 .81 million, $1.3 million in incentives and $1.73 million in $1.73 million. any other compensation not mentioned in the annual report.
Atrium Health Carolina Medical Center in Charlotte.
Courtesy of Atrium Health
The combined organization will have an equal number of members from legacy Atrium and Advocate. Atrium President Edward Brown III would serve in that role until December 31, 2023, to be succeeded by Advocate President Michele Richardson for 2024-25.
The systems said they would commit to creating more than 20,000 new jobs in the communities they serve.
Skogsbergh said the proposed combination “leverages the complementary strengths and expertise of our physicians, nurses and teammates to lead the transformation of healthcare for those we are so proud to serve.”
The systems tout their proposed combined clinical excellence — including medical research and population health — as well as advanced capabilities in data analytics and digital consumer infrastructure as key value accelerators.
There will be an overall commitment of $2 billion “to disrupt the root causes of health disparities in both rural and urban underserved communities,” as well as a commitment to achieve carbon neutrality by 2030.
Atrium's previous acquisition was Floyd Health System of Rome, Ga., in 2021.
Atrium has 42 hospitals in its network and more than 70,000 employees in its four-state network.
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The NC Attorney General's Office, which conducts antitrust reviews of hospital merger applications, said Attorney General Josh Stein and staff were briefed Wednesday on the Atrium-Advocate proposal.
“Our office will have additional questions and intends to closely monitor this agreement,” the office said in a statement.
In February, in response to Cone Health and Sentara ending merger talks, Stein released a statement saying, “I have real concerns about this trend … wave of hospital consolidations.”
He mentioned at the time HCA and Mission in Asheville, Novant Health Inc. and New Hanover Regional in Wilmington, and Wake Forest and Atrium — all of which were ultimately cleared by an antitrust review.
“Bigger doesn't always mean better,” Stein said. “In fact, it often means worse and more expensive.
“My office takes seriously its role in vetting proposed combinations. I encourage all hospital managers to be certain that consolidation is indeed in the best interest of patients and the communities they serve before pursuing it.
On Wednesday, the attorney general's office said Stein is “exploring ways to protect health care in our state because patients must have access to affordable care.”
The NC Healthcare Association expressed support for hospital mergers in general, saying they can offer: standardization of clinical protocols, integration of medical staff and other moves that can help lower health care costs. pooling of services and investment to improve facilities and services; reduced annual operating costs; enhanced bargaining power on issues such as negotiating with workforce staffing services; and improved patient outcomes and reduced readmission rates, “including whether health systems are moving deeper together to focus on improving health equity, as they say they will.”
“The pandemic has highlighted many of the benefits of being part of an integrated health system,” the association said. “The ability to flex staff, supplies and patients in care settings has been vital over the past 27 months.
“We've also seen the need to strengthen supply chains, invest in new technologies and foster a stable and resilient workforce, and well-integrated systems can make these challenges easier to navigate.”
State Treasurer Dale Folwell, who has been a vocal critic of large hospital mergers, said the Atrium-Advocate merger “raises many red flags, chief among them the monopolistic nature of the alliance.”
“Already home to one of the nation's top five metropolitan markets with the highest level of healthcare concentration, North Carolina is no stranger to the negative effects of consolidation.
“Research consistently shows that mergers and acquisitions do not deliver on the promises of hospital executives, but instead result in higher costs, reduced access, and the same or lower level of care.”
Folwell said the Federal Trade Commission, the U.S. Department of Justice and the NC Attorney General's Office “have broad authority over hospital mergers.”
“I encourage them and the NC Department of Health and Human Services to exercise diligent oversight and conduct a vigorous review of this merger to stop and reverse the punishment these health care cartels are inflicting on the citizens of North Carolina.”
Tony Plath, retired professor of economics at UNC Charlotte, predicted that Stein would approve the Atrium-Advocate deal because “there are great benefits to North Carolina, with Atrium's headquarters remaining in Charlotte and Wake Forest's medical school becoming the academic center of the company combination.”
“The combination clearly benefits the health and future competitiveness of the NC .healthcare industry, and the policy of the combination clearly outweighs any anti-competitive concerns — which would be legitimate, at least in my opinion — that Stein's office might bring to the table. “
