February 22, 2018

Mercy, Bon Secours plan to merge

Daily Briefing

    Mercy Health and Bon Secours Health System on Wednesday announced plans to merge to form the fifth-largest Catholic health system in the country, according to a release from the health care systems.

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    Cincinnati-based Mercy is a 23-hospital system with 26 post-acute facilities across Ohio and Kentucky. Bon Secours—based in Marriottsville, Maryland—owns, manages, or participates in joint ventures at 20 hospitals and 27 post-acute care facilities across Florida, Kentucky, Maryland, New York, South Carolina, and Virginia.

    The organizations expect that the deal, which is subject to approval by the Federal Trade Commission and the Catholic Church, will close by the end of 2018.

    Merger details

    If completed, the merged entity would have 43 hospitals and more than 1,000 sites of care, with 2,100 employed physicians and advance practice clinicians, as well as more than 57,000 associates. The system would have $8 billion in net operating revenue and $293 million in operating income.

    Executives for Mercy and Bon Secours said the merger would allow the organizations to better leverage economies of scale to make care more affordable. According to a release from the organizations, the systems are among "the top performing quartile of Catholic health systems for low-cost, high-quality patient care." The release estimated that the merged system would provide nearly $2 million in community benefit daily. 

    Bon Secours President and CEO Richard Statuto in the release said, "The mission, vision, values and geographic service areas of Bon Secours and Mercy Health are remarkably well-aligned and highly complementary." He added, "This merger strengthens our shared commitment to improve population health, eliminate health disparities, build strength to address social determinants of health, and invest heavily in innovating our approaches to health care."

    Mercy President and CEO John Starcher in the release said, "As consumers grapple with the implications of health care reform in a dynamic marketplace, Mercy Health and Bon Secours share a vision to improve the health of the communities we serve as the low-cost, high-value provider." He added, "Working together, our strong faith-based heritage fuels our mutual focus to provide efficient and effective health care for each patient who comes through our door."

    Implications

    According to HealthcareDIVE, the Mercy-Bon Secours proposal comes amid a wave of interest in consolidation at Catholic health systems, including the planned merger of Dignity Health and Catholic Health Initiatives—and amid significant consolidation in the health care industry overall. 

    Leemore Dafny, a professor at Harvard Business School, said that while research suggests mergers in the same market or state lead to higher prices, there is less research into the effects of mergers between entities in different states. According to Terri McNorton, VP of corporate communications at Bon Secours, the systems do not have any overlapping service areas (Mercy/Bon Secours release, 2/21; Kacik, Modern Healthcare, 2/21; Byers, Healthcare DIVE, 2/21; Evans, Wall Street Journal, 2/21).

    There's more than just M&A. Get the cheat sheet for hospital partnership and affiliation models.

    The field guide to hospital partnership and affiliation models

    Behind the flurry of M&A in recent years, a deeper trend of hospital integration is underway: the emergence of alternative partnerships that secure many of the same benefits of M&A without the financial and legal commitment: Clinical affiliation, regional collaborative, accountable care organization, and clinically integrated network.

    This guide defines these types of partnerships and offers benefits, drawbacks, and examples of organizations in each.

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