Two of the Midwest's largest hospital operators — Advocate Aurora Health and Beaumont Health — are “exploring a potential partnership” that could lead to a merger, the companies disclosed Wednesday.
“Following approval last week by the boards, both organizations signed a non-binding letter of intent that paves the way for deeper discussions to create a premier health care system that will span across Michigan, Wisconsin and Illinois ”, Beaumont and Advocate Aurora. Hygeia says in a statement.
Advocate was created through the merger of Illinois-based Advocate Health Care and Aurora Health Care of Wisconsin, and executives of the combined company said they plan to grow in the future to further expand their footprint. An Advocate Aurora deal with Beaumont would give the health systems combined annual revenue of more than $17 billion.
One reason hospitals say they need to grow is to find scale to negotiate with health insurance companies that pay them and get even bigger. Although hospitals have been big winners and are reaping billions of dollars from federal legislation like the Coronavirus Aid, Relief and Economic Security (CARES) Indeed, health care providers could face some revenue loss in the coming months as unemployment rises and more Americans lose health insurance coverage and can't afford to pay their medical bills.
“The potential opportunity to leverage the strength and scale of a regional organization while maintaining a local focus and strong presence in Michigan as a leader and large employer is important to us,” said Beaumont Health President and CEO John Fox.
CVS Health, which operates pharmacies and is a large drug benefit manager, bought Aetna, the nation's third-largest health insurer, more than a year ago, while health insurer Cigna bought pharmacy benefit manager Express Scripts. Meanwhile, UnitedHealth Group, the nation's largest health insurer, is looking to grow its health plan business as well as its Optum health care services unit, which has hundreds of doctors' offices, urgent care centers and surgery centers across the country. .
In the case of Advocate Aurora and Beaumont, executives described the talks as “early stages” but acknowledged that “the partnership under investigation would also allow the nonprofit health providers to strengthen and align their goals to serve the needs of individuals, families and communities throughout the Upper Midwest.”
The merger is likely to be subject to close scrutiny by federal and state antitrust regulators, and executives acknowledged that they have already notified state regulators in Illinois, Wisconsin and Michigan. “Both systems will work closely with state and regulatory agencies throughout the process, which began with notices to all three Attorneys General earlier this week,” the health systems said in a statement.
Advocate Aurora Health, which reported revenue of $12.8 billion for fiscal 2019, ranks as one of the 10 largest “not-for-profit, comprehensive health systems” in the U.S. serving nearly 3 million patients annually in Illinois and Wisconsin through more from 500 locations. of care including hospitals, doctor's offices, urgent care centers and other facilities. Beaumont, meanwhile, is Michigan's largest health care system with a combined annual “net patient revenue of $4.7 billion” from health care facilities that include eight hospitals and 145 outpatient facilities.
“This is a unique opportunity to explore a partnership with a like-minded, purpose-driven organization,” said Advocate Aurora Health CEO Jim Skogsbergh.
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