The CEOs of Froedtert Health and ThedaCare talks with Chief Healthcare Executive about the planned merger, their similar goals and philosophies, and why they say it’ll work.
Froedtert Health and ThedaCare have been moving quickly as the two systems plan for a merger.
In April, the two Wisconsin hospital systems said they had a letter of intent to merge into one organization. Earlier this month, the systems’ boards announced they had a definitive agreement on a merger.
The CEOs of the two systems say they’ve secured most of the regulatory approvals needed to come together, and they hope to operate as a consolidated organization by the end of the year. Froedtert and ThedaCare are looking to form a system that would include 18 hospitals and have over $4 billion in revenue.
When the merger is complete, Cathy Jacobson, CEO of Froedtert, will serve as CEO of the joined organization for six months, and then she plans to retire. Imran A. Andrabi, president and CEO of ThedaCare, will serve as president of the combined system during those first six months. He'll take over as the CEO of the merged system after Jacobson steps down.
The CEOs of Froedtert and ThedaCare spoke about the planned merger with Chief Healthcare Executive®. In a wide-ranging interview, they talked about their similar approaches, the opportunities they see, and why they say this merger is going to be successful. They both see it as essential to work to more broadly improve the health of their communities, beyond simply treating patients when they are sick.
“We are tremendously lucky to have two organizations that have such congruence on some of these subjects that can become really sticky,” Andrabi says.
With the boards signing off on the agreement, Jacobson says they can move forward with planning the integration.
“Now we're really ready to launch, bringing the organizations together,” she says.
(See part of our conversation with the CEOs of Froedtert Health and ThedaCare. The story continues below.)
‘This isn’t a turnaround’
Both Jacobson and Andrabi say they are bullish on the prospects of the merger because the deal involves two healthy organizations coming together. They say Froedtert and ThedaCare both have sound finances, so this isn’t a merger involving one robust partner coming to the rescue of an ailing system.
“We're really combining two very strong organizations,” Jacobson says.
“This isn't a turnaround,” she adds. “This isn't being done for financial reasons. It's not being done for financial consideration reasons. So your focus is in different areas. So we put our attention on what we're trying to do, not necessarily what might be a rote transaction map. And I think that helped us align our resources a lot to get this done.”
Andrabi concurs, saying, “These are two very good organizations that do great work in their communities.”
“This is an opportunity that we should take together, not because we have to, but because we want to,” he says.
A few years ago, ThedaCare began looking at several systems to form a partnership, Andrabi says. ThedaCare focused on Froedtert as the ideal system, even before beginning talks with Jacobson.
Even before the merger talks began, Froedtert and ThedaCare were already working together. Last year, the systems announced plans to establish two health campuses that include hospital and outpatient care services in Fond du Lac and Oshkosh.
Froedtert has long partnered with the Medical College of Wisconsin, and both Jacobson and Andrabi emphasized the importance of expanding academic research and training opportunities with the merger.
As the merger talks began and grew more serious, the CEOs said it was quickly apparent that they were very much in sync.
“You didn't have to explain anything to anybody, and everybody sort of understood what we were trying to create,” Andrabi says. “And then one thing led to another.”
Jacobson says she realized the merger was going to work after the 10th time that she and Andrabi were saying the same thing. “I’m not kidding,” she says with a laugh.
“It was just the series of conversations that we had that just continued to show that these two organizations speak the same language, we have the same values, we have the same priorities,” Jacobson says. “Quite frankly, we already operate the same, from our governance structures to our operating models to being metric-driven.”
Staying in Wisconsin
Some recent mergers have involved systems from different regions, including the Atrium Health and Advocate Aurora Health merger to form Advocate Health. Kaiser Permanente, based in California, announced plans to acquire Geisinger, the Pennsylvania health system, earlier this year.
Both leaders stressed the importance of partnering with another organization based in Wisconsin.
“We chose to intentionally stay within the state of Wisconsin,” Andrabi says. “And we chose to have our governance within the state and our leadership within the state, so we can be accountable to the people that we serve. And those are all very intentional conversations.”
Froedtert, based in Milwaukee, operates 10 hospitals and partners with the Medical College of Wisconsin to provide healthcare services. ThedaCare, which operates eight hospitals, serves northeast and central Wisconsin.
“We both believe that you can provide more value when you are closer to home, and and actually closer to your region, and that you do have different insight on your communities and regions, when you're actually the people who are living, working and quite frankly, utilizing the healthcare,” Jacobson says.
Jacobson says Froedtert has been eyeing ThedaCare as a potential partner for quite some time.
“We're always attempting to get more patients for our academic medical center, get more lives under population health, which was a really important goal for us,” Jacobson says. “And then eventually, we knew we needed to be big enough to attract national talent, national partnerships for innovation and technology. So we always had our eye on different partners across the state.
“We didn't want it to be random, just who was in need, who was in distress,” she adds. “So we had ThedaCare on our radar screen for a very long time. For all the reasons that Imran talked about, we just are so aligned on clinical excellence, who's leading in their community, a national reputation for innovation and transformation.”
Both Andrabi and Jacobson say stakeholders have embraced the planned merger of the two systems.
Andrabi says it’s been an “excellent surprise.”
“All our stakeholders, and every single one of our stakeholder groups, has been excited,” he says.
‘A totally new entity’
The Federal Trade Commission has applied more scrutiny to hospital mergers under the Biden administration. President Biden signed an executive order directing federal agencies to look closely at healthcare mergers, including hospital consolidations, to promote competition and guard against higher costs and lower wages. Lawmakers in both parties have raised concerns about reduced services as a result of hospital mergers.
Jacobson and Andrabi say their focus is on expanding healthcare services and raising the quality of patient care.
“Everything we put out is about the promise to our community,” Jacobson says. “You've never, ever heard us once say that this is a back office opportunity, or we're going to do this to cut our costs.”
“We've made pledges to reduce the total cost of care, because we think that everybody should be focused on that in healthcare,” she adds. “But we've never ever held it out to be cost cutting or cost reduction or anything like that.”
They also stress they will be accountable to meet their goals, and they say they have stressed that with their governing boards.
“I’ve had this conversation with our board,” Jacobson says. “This is where healthcare mergers fail, if you don't hold yourself accountable to the promises that you make.”
The leaders say both organizations are metric-focused, and will ask the board of the new organization to ensure they are fulfilling their pledge to their communities.
Andrabi says that the impending merger means Froedtert and ThedaCare are both embracing the chance to move beyond the care they’ve traditionally provided.
“We are actually creating a combined organization that is a totally new entity,” Andrabi says. “And so coming into it with that mindset, that this is something new, and thinking about how care can be delivered in a different way, and not different just to be different … different where it truly matters from a value creation perspective. And that enables us to think about things, you know, in a way that we may not have thought about.”