- Four months after signing a non-binding letter of intent to merge, Midwestern hospital systems Advocate Aurora Health and Beaumont Health have mutually called off merger discussions.
- Discussions began in late 2019, but stalled earlier this year as the coronavirus pandemic accelerated in the U.S., stressing provider finances, and reports of opposition from Beaumont doctors.
- Beaumont wants to focus on its local market priorities and its staff, John Fox, CEO of Beaumont, which is Michigan's largest hospital system, said in a statement. Advocate Aurora CEO Jim Skogsbergh said the Illinois-based, 26-hospital system has "great respect for Beaumont" and continues to "believe scale will play a critical role" in Advocate Aurora's future.
Though major hospital systems, buoyed by federal COVID-19 relief funds and investment income, aren't facing near-term insolvency due to the pandemic, COVID-19 continues to stress finances and provider plans for growth.
Beaumont, which has eight hospitals and nearly 150 outpatient sites, nixed a smaller planned merger with Ohio-based Summa Health in May, citing COVID-19 uncertainty.
Combined, Advocate Aurora and Beaumont would have formed a Midwestern powerhouse with annual revenue of about $17.5 billion. Plans to merge were announced in June this year when the two nonprofits received board approval, and notified attorneys general in Michigan, Wisconsin and Illinois.
However, final board approval was put on hold in August, following reports the vote was being delayed due to a petition from Beaumont's doctors opposing the deal. System executives said physician concerns were due to local, hospital-specific issues, and didn't involve the merger with Advocate Aurora.
However, Fox's statement lends some credence to speculation Beaumont's staff were concerned about the merger with the much-larger Advocate Aurora. "At this time, we want to focus on our local market priorities and the physicians, nurses and staff who provide compassionate, extraordinary care every day," Fox said.
Numerous studies have shown large hospital mergers don't improve quality of care, and do correlate with an increase in prices for commercially insured patients.
Yet industry headwinds like lowering reimbursements, the shift to outpatient care and now COVID-19 could give rise to faster hospital M&A in the long-term, experts say. Almost 30% of healthcare execs say the crisis has made them more likely to consider M&A or partnerships, according to a May Guidehouse survey. And consolidation in the second quarter wasn't nearly as low as analysts originally predicted, according to consulting firm Kaufman Hall.