October 27, 2020

Intermountain + Sanford: Our take on the $15B 'megapolitan' merger

Daily Briefing

    Intermountain Healthcare and Sanford Health on Monday announced they have signed a letter of intent to merge, a deal that stands to create a $15 billion health system.

    Merger details

    According to Modern Healthcare, the boards of both health systems last week unanimously voted to approve the merger, which—pending state and federal approval—is expected to close in summer 2021.

    While both organizations intend to retain their branding for the "foreseeable future," according to the announcement, the combined system will be called Intermountain Healthcare. The merged system will be headquartered in Salt Lake City, Utah, where Intermountain is currently headquartered, while corporate offices will be maintained in Sioux Falls, South Dakota, where Sanford is currently headquartered.

    Intermountain CEO Marc Harrison will serve as the combined system's CEO and president, while Sanford CEO Kelby Krabbenhoft will serve as president emeritus. The current boards of trustees from each system will form a combined board, and a new executive committee of the board will be established, incorporating in equal numbers members from Intermountain and Sanford's current boards. Gail Miller, who currently chairs the Intermountain board, will serve as the board chair when the organizations are combined.

    Together, the combined system would staff more than 89,000 employees across 70 hospitals and 435 clinics in seven states, according to the news release. The combined organization will also provide senior care across 233 locations in 24 states, and the two health systems, which currently operate private health insurance businesses, will together insure 1.1 million people.

    Comments

    "In many ways, this is a match made in heaven," Harrison said on Monday. "This merger enables our organizations to move more quickly to further implement value-based strategies and realize economies of scale. Through coordinated care, increased use of telehealth and digital health services, we will make health care more affordable for our communities."

    Harrison added, "This is not something that needs to happen. This is not a turnaround." Rather, "[t]his is two really strong organizations coming together. It's not me sending a check to Kelby, and it's not him sending one to me."

    Krabbenhoft similarly said there wasn't any "mystery" or "hidden story" as to why the health systems are merging. "By coming together with Intermountain Healthcare, we will improve the health and well-being of the communities we serve and strengthen our impact in health care delivery and value."

    Further, noting that he's 62 and plans to retire at 65, Krabbenhoft added, "I couldn't think of a better person to hand over what I've been overseeing for 25 years than Marc Harrison. He's an incredible leader. He gets the national scope of the impact and the burden" (Bannow, Modern Healthcare, 10/26; Reed, Fierce Healthcare, 10/26; Sioux Falls Argus Leader, 10/26).

    Advisory Board's Take

    Ben Umansky, Expert Partner

    With this announcement, Intermountain Healthcare and Sanford Health both take big steps toward their respective strategic dreams. The combined system will fulfill the "megapolitan" vision Sanford CEO Kelby Krabbenhoft has ardently espoused, though without the dominant role for Sanford that it might have played in other potential partnerships. Intermountain, a system of national renown but heretofore merely regional footprint, will now have a massive geographic workshop to shape health care across the country—and to grow its vaunted SelectHealth insurance arm. Unlike in some other health care megamergers, the strategic promise here is obvious.

    Of course, size does not guarantee success. The early and public decisions regarding executive leadership and board governance auger well; letting such issues lie unresolved has doomed many a merger. Nevertheless, the financial and geographic scope of this deal will pose integration challenges on a scale neither partner has encountered before. Intermountain CEO Marc Harrison's ample talent for structural and strategic reorganization will be put to the test, as will Sanford's ability to thrive under new leadership for the first time since its formation. But if Intermountain's reputation for clinical and operational excellence proves consistent at scale, Salt Lake's considerable national influence will only grow stronger.

    Next, listen to our recent interviews with Marc Harrison

    There has been no shortage of questions about what the future of our industry could look like in a post-Covid world. Executives across health systems are asking, "What should I be doing today to change my strategic plan to better match what the industry is going to look like moving forward?"

    To help, in a two-part series for "Radio Advisory," we invited Intermountain President and CEO Marc Harrison onto the podcast to share his perspectives on:

    Listen now
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