November 13, 2019

UnityPoint Health and Sanford Health on Tuesday separately announced that they will not proceed with a proposed merger that would have formed an $11 billion integrated health system.

Maybe we shouldn't believe the hype about hospital mergers and acquisitions

Background

Sanford, based in Sioux Falls, South Dakota, has 44 hospitals, 482 clinics, and more than 200 senior care centers in 26 states and nine countries and is the dominant health care system in its largest markets in North Dakota and South Dakota.

UnityPoint, based in Des Moines, Iowa, has 32 hospitals and 280 clinics in Iowa, Wisconsin, and Illinois and is the biggest or second-biggest system in three major markets in Iowa and Illinois.

The two health systems announced their intent to merge in June. The merged system would have encompassed 76 hospitals and outpatient and long-term care centers across 26 states. It would have employed more than 83,000 people and 2,600 physicians.

Merger called off

Sanford and UnityPoint separately announced on Tuesday that the health systems had decided to call off merger talks.

Kelby Krabbenhoft, president and CEO of Sanford, in a letter to employees reviewed by the Wall Street Journal said that the two health systems were scheduled to vote on the deal on Nov. 12, following more than a year of "deliberate, difficult, professional, and serious process and agreement." However, UnityPoint met a day earlier and voted 13-6 to reject the merger, Krabbenhoft said.

Krabbenhoft in a statement, said that Sanford was "disappointed" at the outcome. "We were excited at the opportunity our combination would have provided to create a new health system of national prominence."

Officials with UnityPoint in a statement said they "seriously explored" the potential merger but ultimately "concluded we can most effectively fulfill our mission by maintaining our existing corporate structure."

Kevin Vermeer, president and CEO of UnityPoint, in a statement said, "I'm tremendously proud of our organization and we will continue to work tirelessly to evaluate any avenue that improves the delivery of health care. Sanford is an exceptional organization with a bright future ahead. UnityPoint Health moves forward with strong roots and a fierce commitment to improving the experience of the people we serve" (Evans, Wall Street Journal, 11/12; Kacik, Modern Healthcare, 11/12; Rodriguez, Des Moines Register, 11/12; Ellis, Sioux Falls Argus Leader, 11/12).

Maybe we shouldn't believe the hype about hospital mergers and acquisitions

The past few years of mergers and acquisitions (M&A) have seemingly created a new dichotomy for hospital and health system leaders: Either merge or risk losing market relevance. But is M&A really an answer to today's health care challenges? Here are three ways the evidence often doesn't live up to the hype.

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