Atrium Health, Advocate Aurora Health plan to merge, form $27B system

Assuming the deal is approved by regulators, the new organization will operate 67 hospitals in six states. The new system would be known as Advocate Health.

Advocate Aurora Health and Atrium Health announced plans today to merge the two health systems, as they plan to form a new organization with a combined $27 billion in annual revenue.

Assuming the deal is approved by regulators, the new system will operate 67 hospitals with more than 1,000 ambulatory sites and more than 148,000 employees. The combined organization will employ more than 7,600 physicians and serve 5.5 million patients. The deal also brings two sizable non-profit hospital systems together.

The announcement comes at a time when there has been little merger activity in the hospital sector, although analysts expect to see more deals this year.

President Biden’s administration has given close scrutiny to healthcare mergers to increase competition and to deter the higher healthcare costs seen in some mergers. But this deal involves two systems in separate markets.

Atrium Health is based in Charlotte, N.C. and serves North Carolina, South Carolina, Georgia, and Alabama, while Advocate Aurora serves Illinois and Wisconsin.

The new organization would be named Advocate Health, but the systems would keep the names of the Advocate and Atrium brands in their local markets, leaders said.

In a video accompanying the announcement, Eugene A. Woods, president and CEO of Atrium Health, said the newly combined organization “will transform the way care is delivered in this country.”

“Together we will be able to do more, be better, go faster in serving our patients and community as we write a bold new chapter in the unwritten future of healthcare,” Woods said. (The story continues after the video.)

Jim Skogsbergh, president and chief executive officer of Advocate Aurora Health, said the two healthcare systems have similar values and skills.

“I think we’re so complementary of one another. It’s going to be a great ride,” he said.

Woods and Skogsbergh will serve as co-CEOs of the new organization for 18 months, the systems said. Then, Skogsbergh will retire and Woods will serve as the sole chief executive of the new Advocate Health.

The boards of both systems unanimously approved the merger. Assuming regulatory approval, a new board with an equal share of members from both systems will oversee the new Advocate Health.

Edward J. Brown III, chair of Atrium Health’s board of directors, will chair the merged board of directors until December 31, 2023. Michele Richardson, chair of Advocate Aurora Health’s board of directors, will take over for the following two-year term.

The new organization will be based in Charlotte, but the systems said it would continue to have a “strong organizational presence” in Chicago and Milwaukee. The system plans to build a new institute for health equity in Milwaukee.

Wake Forest University School of Medicine will serve as the system’s academic core, officials said.

Woods said the two systems would provide $5 billion to improve access and health in vulnerable communities across the six states served by the new organization.

The merged system plans to devote $2 billion to address the root causes in health disparities in urban and rural communities. The new organization pledged to focus on sustainability, vowing to achieve carbon neutrality by 2030.

In addition, the new Advocate Health plans to create 20,000 new jobs across their service area.

In the first quarter of 2022, there were only 12 announced mergers or acquisitions, according to a Kaufman Hall report. That’s the smallest number in any first quarter since 2016.

However, analysts say they expect to see more hospital mergers in the rest of the year. Many hospitals continue to struggle financially in the wake of the COVID-19 pandemic as they face higher labor and supply costs, while volume has still been unsteady.

Some hospitals may look to find partners to avoid going under, Ash Shehata, KPMG’s national sector leader for healthcare and life sciences, told Chief Healthcare Executive in an interview last month.

“The strong will remain stronger,” Shehata said. “Those that struggle will likely be targets for acquisition.”

A few high-profile mergers have taken place in recent months. Intermountain Healthcare completed its merger with SCL Health last month. City of Hope completed its acquisition of the Cancer Treatment Centers of America in February.

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