Essentia Health and Duluth-based Marshfield Clinic, a nonprofit operator of hospitals and clinics based in central Wisconsin, say they are not moving forward with a merger announced in July.
Essentia and Marshfield issued a joint statement Friday saying they had ended talks.
In its own statement, Essential Health said Marshfield's finances were the primary factor in its decision.
“To be clear, Essentia's finances are strong and it is imperative that we maintain that stability so we can continue to invest in and enhance care for our patients,” the Duluth health system said.
It's the second proposed health system merger to collapse in the past year in Minnesota, where the 2023 Legislature expanded the state attorney general's authority to review merger proposals. However, Essentia said in its statement that “regulatory reviews were still pending and did not affect the outcome of our negotiations with Marshfield Clinic.”
In July, Minneapolis-based Fairview Health Services and South Dakota-based Sanford Health withdrew their mega-merger proposal after failing to get buy-in from key Minnesota shareholders.
On Friday, the Essentia-Marshfield joint statement said that after two years of discussions, “we have decided that a combination at this time is not the right path for our respective organizations, colleagues and patients.”
Essentia Health is Duluth's largest employer with approximately 15,000 employees. The health system includes 78 clinics and 14 hospitals in Minnesota, North Dakota and Wisconsin.
Last summer, Essentia Health completed a massive four-year construction project that included a new $915 million hospital tower and clinic space. It was the largest private investment in the city's history, spurring further development in what is now the city's Medical District, with nearby St. Luke to expand as well.
Essentia plans to demolish its former hospital, which could potentially become the site of a new University of Minnesota Medical School building.
A merger of Essentia with Chicago-based CommonSpirit Health under Catholic Health Initiatives (CHI) fell through in May 2021. The Duluth health system was set to take over two dozen CHI-branded properties, including the CHI St. Alexius Health in Bismarck, ND , and a suite of rural clinics and hospitals in Minnesota.
Regarding the failed merger with Marshfield, Essentia Health CEO Dr. David Herman said, “As we have explored this opportunity, I value the relationships we have built with the skilled providers, staff and leaders at Marshfield Clinic who share our dedication to exceptional Care.”
Marshfield Clinic employs more than 12,000 people. It operates 11 hospitals as well as 60 clinic locations throughout Wisconsin and Michigan's Upper Peninsula.
Dr. Brian Hoerneman, interim CEO at Marshfield Clinic Health System, said the nonprofit groups are similar because they are high-performing, community-focused organizations.
“These similarities served as the basis for the efforts for a combination,” Herneman said, adding that the health systems “will now operate separately.”
In a Friday statement to bondholders, Essentia added: “We will continue to seek opportunities to collaborate as two integrated mission-driven health systems dedicated to sustainable rural healthcare.”
Duluth's second-largest health system, St. Luke's, announced in July its own merger plans with Wausau, Wis.-based Aspirus Health.
Minnesota Attorney General Keith Ellison held a public meeting on the two Duluth merger proposals in October, which drew mostly support from local leadership, though health care workers seemed more skeptical.
The Minnesota Nurses Association (MNA), which represents unionized nurses at various Essentia Health facilities, welcomed the news Friday, saying the merger threatened to raise costs and eliminate jobs. Chris Rubesch, the MNA president, said in a statement: “The defeat of this planned merger is a victory against the further corporatization of our health system.”
Star Tribune staff writer Jana Hollingsworth contributed to this story.
