The two systems said they are exploring a partnership. If they come together, the merged organization would operate more than 40 hospitals.
UnityPoint Health and Presbyterian Healthcare Services are exploring a merger, and officials say the potential partnership is aimed at improving care and cutting costs.
If they do come together, the two systems will create a merged organization with more than 40 hospitals, a workforce of 40,000 employees, and nearly 3,000 doctors.
The two systems operate in separate regions, potentially avoiding a stocking point with regulators, who have objected to deals involving organizations in the same regions. UnityPoint operates hospitals in Iowa, Illinois and Wisconsin, while Presbyterian serves New Mexico.
Here’s a look at some key takeaways of the deal.
Many hospitals and health systems are struggling financially, and about half of the nation’s hospitals finished 2022 with negative operating margins, according to Kaufman Hall, the healthcare consulting firm.
Dale Maxwell, president and CEO of Presbyterian Healthcare Services, said in a statement that exploring a partnership is another step in protecting the organization’s future.
“As a not-for-profit health system, we must pave a sustainable path forward to continue serving our communities with care and coverage,” Maxwell said. “While we’ve done that successfully independently, we know that partnering with like-minded health systems will allow us to accelerate our efforts.”
Affordability and accessibility
Clay Holderman, president and CEO, UnityPoint Health, said partnering with Presbyterian could expand care options for patients.
“By lowering administrative costs, building new capabilities and increasing investments in innovation and clinical excellence, our intent is to help improve affordability and accessibility of care. We’re excited about the unique possibilities ahead,” Holderman said in a statement.
Mergers may be picking up
The UnityPoint-Presbyterian discussions offer yet another sign that hospital mergers, which plunged during the COVID-19 pandemic, may be picking up.
Analysts have predicted there would be more mergers in 2023, either due to systems seeking strategic opportunities or out of financial necessity. Some hospitals in serious difficulty may need to find partners to stay afloat, experts say.
There were 53 hospital mergers and acquisitions in 2022, which represents only a slight increase from the 49 deals in 2021, according to Kaufman Hall. By comparison, there were at least 90 hospital deals annually from 2012 through 2019 (including a peak of 117 in 2017).
But deals picked up in the last few months of the year, with 17 transactions in the final quarter. More importantly, analysts say the size of the deals is a sign that hospitals and health systems are looking more strategically. In many of the deals, the smaller party had an average size of more than $1 billion.
(In this video, Anu Singh of Kaufman Hall talks about why he expects to see more hospital mergers. The story continues below.)
Emerging model for mergers
With UnityPoint operating in the midwest and Presbyterian in New Mexico, the sizable deal avoids concerns about the two systems taking an outsized piece of a local market and potentially stifling competition.
The partnership echoes the recent merger of Atrium Health and Advocate Aurora Health, which was just completed in December. The two formed a new system - Advocate Health - that is now one of America’s largest nonprofit hospital systems. Atrium is based in North Carolina and also serves South Carolina, Georgia, and Alabama, while Advocate Aurora operates in Illinois and Wisconsin.
The Federal Trade Commission has opposed several deals involving systems in the same areas, saying they could lead to higher prices and reduced services for patients. Last month, SUNY Upstate Medical University dropped its plan to acquire Crouse Health System in Syracuse, N.Y., amid FTC opposition.
Field of deals
Iowa may be known as the setting of the classic movie, “Field of Dreams,” and it’s also becoming a field of deals.
Just days before UnityPoint and Presbyterian announced they could be coming together, MercyOne and Genesis Health Care announced that they have completed their merger of the Iowa systems. Genesis is now a part of MercyOne.
Brands would remain
Both the UnityPoint and Presbyterian brands would continue in their markets if they come together, the systems said.
If they merge, they would form a parent organization and focus on achieving “administrative efficiencies,” the systems said.
Presbyterian said in a statement on its website, “Please know there will be no changes for patients or members as we will continue to serve your needs as Presbyterian. Your doctor, clinic and coverage remain the same.”
Touting ‘similar values’
Industry analysts say health systems need some common values to succeed with a partnership, and the leaders of UnityPoint and Presbyterian touted shared ideals.
“UnityPoint Health and Presbyterian are two organizations rooted in similar values,” Holderman said in a statement.
Likewise, Maxwell said, “UnityPoint Health shares in our commitment to keeping healthcare delivery local and creating a culture where the workforce thrives which will serve as foundational elements as we embark on this journey.”
The next steps
The two systems said they will explore the possibility of a deal in greater depth over the coming months. If those discussions prove successful, they would announce a definitive approval and begin seeking regulatory approvals.
Presbyterian said there is no timeline and said the systems will spend the coming weeks and months examining the path forward.