Duluth, Minnesota-based Essentia Health and Marshfield, Wisconsin-based Marshfield Clinic Health System have withdrawn their plan to merge into a 25-hospital Midwest system.
The two nonprofit health systems said in a statement that they have “engaged in meaningful discussion” over the past two years about how the organizations could combine their unique strengths.
“We have decided that a combination at this time is not the right path for our respective organizations, colleagues and patients,” the health systems said in a statement posted on Essentia Health's website Friday.
“We will continue to seek opportunities to collaborate as two integrated, mission-driven health systems dedicated to sustainable rural health care. Our organizations have great respect for one another, and we each remain committed to strengthening the health of our communities as we offer high-quality, compassionate patient care,” said health system leadership.
Essentia Health and Marshfield Clinic shared plans in October 2022 to explore a possible merger. Health systems signed an accession agreement in July that would include a network of 3,800 providers and 150 care sites, including 25 hospitals. The proposed combined entity would serve more than 2 million rural and mid-urban Midwest residents.
Three months ago, Minnesota Attorney General Keith Ellison said he was reviewing the pending health system merger under a recently passed state law that gave his office additional authority to determine whether deals are in the public interest.
The nonprofit Essentia Health operates 14 hospitals, 77 clinics, six long-term care facilities and other businesses in its home state of Minnesota, as well as North Dakota and Wisconsin. The not-for-profit comprehensive health system employs 15,000 people and serves patients in Wisconsin, North Dakota and Minnesota.
The CEO of Essentia Health, Dr. David Herman, said the health system continues to focus on “building innovative partnerships and transforming care for its communities.”
Marshfield Clinic Health System often describes itself as one of the largest rural integrated systems in the country. The nonprofit organization employs more than 12,000 people at 11 hospitals, a health plan, research and education programs and other care sites. It is geographically adjacent to Essentia and operates throughout Wisconsin and parts of Michigan.
“Essentia Health and Marshfield Clinic Health System are high-performing, respected and community-focused organizations. These similarities served as the basis for efforts toward a combination,” said MCHS Interim CEO Dr. Brian Hoerneman.
“As we now go our separate ways, Marshfield Clinic looks forward to carrying forward our 100-year legacy of providing compassionate and accessible care to the communities we serve,” said Hoerneman.
This is the second time in just four years that Marshfield Clinic Health System has been in merger talks that have failed. In December 2019, Gundersen Health System and Marshfield Clinic Health System decided to remain separate companies after several months of merger discussions, Marshfield News Herald mentionted.
Public financial disclosure documents show MCHS reported in its third-quarter report that its operating earnings before interest, depreciation and amortization (EBITDA) for the first nine months of fiscal 2023 were at a margin of 0.1%, from 0.8% a year earlier . MCHS' operating EBITDA fell from $18.4 million last year to $2 million this year, a decrease of $16.4 million.
The system generated an operating loss of $133.5 million (-5.8% margin), compared to an operating loss of $92.6 million in the prior year, a decrease of $40.9 million. MCHS generated total revenue of $2.32 billion compared to $2.28 billion generated last year, an increase of $41.4 million.
For use 2023, Essentia Health reported revenue of $2.8 billion and operating income of $110,000. Expenses rose 8.4% to a total of $2.7 billion during the year ended June 30.
Net income jumped to $121.7 million for the year, compared with a net loss of $72 million in 2022, according to its unaudited financial statements.
