If they agree to come together, a merger would produce a system with 25 hospitals and more than 26,000 employees. The deal comes during a fairly slow period for hospital consolidations.
Essentia Health and the Marshfield Clinic Health System have begun talks that could lead to a merger.
The two health systems said this week that they have signed a memorandum of understanding to examine how the two systems could come together to create a regional health system.
If Essentia and Marshfield Clinic merge, it would create a system of 25 hospitals and more than 26,000 employees. The systems said in a statement they could enhance healthcare for patients and offer “complementary geographies and capabilities.”
Essentia operates 14 hospitals along with dozens of clinics in Minnesota and North Dakota, along with a few facilities in Wisconsin. Essentia employs more than 14,000 people.
Marshfield Clinic manages 11 hospitals and other sites of care in Wisconsin and Michigan’s upper peninsula. The system employs more than 12,000 workers.
The two organizations said the memorandum of understanding represents the first step toward a possible merger, but they didn’t share any timetable for future plans. The systems said more information would be released later.
Essentia CEO Dr. David Herman said he has respected the work of Marshfield Clinic for decades.
“I have always appreciated their ability to advance the well-being of the communities they serve,” Herman said in a statement. “I am truly excited to work together for the benefit of our patients and our colleagues.”
The two organizations also share similar values, he said. “Through a new partnership, we can support the care models, services, research and technologies to ensure sustainable and thriving rural health care,” Herman said.
“This is an exciting opportunity for both our organizations and those we serve,” Marshfield Clinic Health System CEO Dr. Susan Turney said in a statement.
“These are two of the premier health systems in the country, looking to come together to serve rural communities and beyond,” she said. “When I look at Essentia, I see an organization with world-class expertise that complements our own. And I see their long, rich history of serving communities with a mission very similar to ours at Marshfield Clinic Health System.”
The organizations said in a news release that a merger would offer expanded opportunities for primary and specialty care for patients.
Essentia and Marshfield Clinic, while both serving northern states, have little overlap in their service areas, which could diminish problems with approval of the Federal Trade Commission.
The FTC has opposed several deals by hospital systems in overlapping areas recently, prompting the organizations to pull the plug on their merger plans. President Biden’s administration has directed regulators to apply more scrutiny to hospital mergers to avoid higher costs for consumers and reduced services.
The COVID-19 pandemic appears to have slowed the pace of hospital consolidations, analysts have said. Many systems have been preoccupied with dealing with the pandemic, along with labor shortages and supply chain issues.
In the third quarter of 2022, only 10 hospital transactions were announced, according to Kaufman Hall, a consulting firm that works with healthcare organizations. There were only 25 deals announced in the first half of the year. While there are fewer deals, the transactions have been bigger, including the proposed merger of Atrium Health and Advocate Aurora Health.
Two health system deals have just been announced in the past week.
LCMC Health has reached an agreement to buy three hospitals in the New Orleans area from HCA Healthcare. Yale New Haven Health System plans to buy two Connecticut health systems, including three hospitals, from Prospect Medical Holdings.