- Midwestern nonprofits Advocate Aurora Health and Beaumont Health are exploring a merger, the organizations announced Wednesday in a joint press release. Combined, the systems would have about $17.5 billion in revenue.
- The systems signed a non-binding letter of intent Wednesday after approval from both boards last week, along with notification of the attorneys general in Michigan, Wisconsin and Illinois. Talks began at the end of last year but were put on hold with the onset of the COVID-19 pandemic, according to the release.
- The organizations have agreed to an equal one-third governance representation for any partnership, between Beaumont, Advocate Health Care and Aurora Health Care. The latter two merged in 2018.
Beaumont, Michigan's largest health system, nixed a planned merger with Ohio-based Summa Health last month, citing the pandemic and the uncertainty surrounding it. Beaumont, with $4.7 billion in annual revenue, has eight hospitals and nearly 150 outpatient sites.
Advocate Aurora, which says it is one of the nation's 10 largest nonprofit health systems, has nearly $13 billion in annual revenue across almost 30 hospitals in Illinois and Wisconsin.
Both systems, like others across the country, have been battered by the COVID-19 crisis.
Advocate Aurora reported an operating loss of $49.3 million in the first quarter of this year and an operating margin that fell to -1.6% from 4.3% in the prior year period. Still, it reported having 229 days of cash on hand, and Fitch Ratings noted in April it "can withstand considerable pressures" from the crisis.
Beaumont's net operating income in the first quarter fell more than $90 million to -$54.1 million with a -5% operating margin. It said, however, that with more than $2 billion in cash and investments and 176 days of cash on hand, it "has the financial wherewithal to weather these challenges."
While the full financial effects from the COVID-19 pandemic remain to be seen, the losses and uncertainty could lead providers to seek more stability in the form of M&A.
In a recent Guidehouse survey, nearly 30% of healthcare executives said the crisis made them more likely to consider M&A or partnerships.