Sanford Health and Marshfield Clinic Health System said they have signed a non-binding agreement. Both systems explored mergers with different partners recently.
Two hospital systems in the midwest are looking to come together.
Sanford Health and the Marshfield Clinic Health System said this week that they have signed a non-binding merger agreement. If the deal is finalized, the organizations would create a 56-hospital system with nearly 56,000 employees and 4,300 providers.
The two systems have a combined revenue of $10 billion, and the deal represents one of the largest hospital mergers of the year.
Under the deal, Marshfield Clinic would become a part of Sanford Health, which would be the name of the parent company.
The systems say they hope to complete the deal by the end of the year. Regulators must sign off on the merger.
Sanford Health, based in Sioux Falls, S.D., operates 45 hospitals and more than 200 clinics, serving patients in South Dakota, North Dakota, Minnesota and Iowa. Marshfield Clinic, based in Marshfield, Wisc., runs 11 hospitals and more than 60 clinics in Wisconsin and Michigan’s upper peninsula.
Both organizations also operate health plans, and they both serve largely rural areas.
Anu Singh, managing director at Kaufman Hall, notes that the deal is another merger of systems in different markets, such as Atrium Health and Advocate Aurora Health merging to form Advocate Health in 2022. In a changing hospital industry landscape, systems can join forces even if they don’t have proximity to each other, he says.
“Sanford and Marshfield don't have a geographic overlap. They're in complementary markets,” Singh says.
‘Incredible opportunity’
Bill Gassen, president and CEO of Sanford Health, said both systems share a “common purpose” to lead and innovate in rural healthcare. Assuming the deal is finalized, Gassen would serve as president and CEO of the combined system.
“We are who we are today because of combinations with care delivery organizations in rural communities across America’s heartland,” Gassen said in a statement. “These opportunities have allowed us to follow through on our promise to deliver world-class health care to every patient we serve no matter their ZIP code, and we are eager to continue building on this track record with Marshfield Clinic Health System.”
The systems said they expect the merger will lead to better outcomes for patients through more expansive value-based care programs and population health efforts. Officials also said they expect that they will see better research opportunities and develop stronger training for clinicians.
Brian Hoerneman, MD, interim CEO of the Marshfield Clinic Health System, set a lofty goal with the merger.
“Partnering with Sanford Health presents an incredible opportunity for our organizations to unify and establish the premier rural health system in the nation,” Hoerneman said in a statement.
If the deal comes together, Hoerneman would serve as president and CEO of the “Marshall Clinic region” of the combined system.
“Together, we will ensure sustainable access to exceptional care for our communities for years to come,” Hoerneman said. “With a shared mission to serve, a mutual emphasis on research and education, and a strong tradition of physician leadership, Sanford Health is the ideal partner for this endeavor.”
Previous merger attempts
It looked like Marshfield Clinic found a partner earlier, as the system had initially planned to merge with Essentia Health in Minnesota. The two systems announced their plans in 2022, but in January, the organizations said that they would not be coming together after all.
Shortly after announcing the planned merger with Essentia wasn’t happening, Marshfield Clinic Health System announced furloughs of 3% of its staff as a cost-saving measure. In January, Fitch Ratings said it had a negative outlook for the system due to its cash flow constraints and operational challenges, and downgraded its bond rating from BBB+ to BBB. Marshfield Clinic had $2.9 billion in revenue in 2022, according to Fitch.
Sanford Health also had planned a merger with Fairview Health Services in hopes of forming a system with more than 50 hospitals and 600 sites of care. But the systems met opposition from some elected officials and they announced last summer that they were dropping their consolidation plans. Gassen cited the resistance of some Minnesota officials in abandoning the deal.
Sanford enjoys a strong market presence but isn’t dependent on any one area for its performance, and the system’s operating revenue in 2022 was $7.1 billion, Fitch said in a September 2023 note. Sanford has an “AA-” rating on its long-term debt from Fitch Ratings, which said the system’s ratings outlook is stable.
Other noteworthy deals
The Sanford-Marshfield merger follows some other noteworthy merger discussions in recent months.
Northwell Health and Nuvance Health announced plans to merge in February. If regulators approve the deal, the combined system would operate 28 hospitals and more than 1,000 sites of care. Northwell is New York’s largest healthcare provider, and Nuvance operates in Connecticut and part of New York.
Jefferson Health and the Lehigh Valley Health Network announced a definitive merger agreement in May. In that deal, Lehigh Valley would become part of Jefferson and the merged system would operate 30 hospitals in Philadelphia and across eastern Pennsylvania.
Risant Health, a subsidiary of Kaiser Permanente, announced plans to acquire Cone Health, a five-hospital system based in Greensboro, North Carolina. Risant completed the acquisition of Geisinger Health in Pennsylvania in April.
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