Atrium, Wake Forest start merger talks for $13B system
- Charlotte, North Carolina-based Atrium Health and nearby academic medical center Wake Forest Baptist Health on Wednesday announced plans to merge. Also in on the discussion is Wake Forest School of Medicine, which could get a second campus.
- The combination of nonprofit Atrium and the Winston-Salem-based medical center would create a system with nearly $13 billion in annual revenue, almost 50 hospitals and about 1,300 additional care locations.
- Exclusive negotiations on the terms of the arrangement have just begun but the groups said in a press release they expect talks to conclude later this year.
The deal is another in the rise of mega-regional players expanding their reach across more state lines. Other parts of the country have seen health providers creep into new markets to form behemoth players in their region, including Illinois-based Advocate Health Care's merger with Wisconsin-based Aurora Health Care.
Last year, Atrium Health inked a deal to partner with Navicent Health, expanding Atrium's reach into Georgia. The deal closed at the beginning of this year. As the health system expands outside the Carolinas, it has had to rebrand itself from the Carolinas HealthCare System.
Other recent deals in North Carolina include HCA's $1.5 billion buy of Asheville-based Mission Health in January.
After its failed merger attempt with UNC Health last year, the deal Atrium has in the works with Wake Forest shows the system is dead-set on trying to anchor its business with an academic medical center.
A recent report from Moody's found that though AMCs attract more inpatients and revenue than non-AMC nonprofits, their higher costs may put them under greater pressure in the shift to value-based care.
Atrium's additional M&A activity could heighten worries of overconsolidated markets. Last year, Atrium agreed not to use "anticompetitive steering in contracts" with payers and providers as part of a settlement with the U.S Department of Justice, which alleged the system had prevented consumers from getting the most cost-effective services.
The alliance with Wake Forest University is dubbed Best Care for All. The resulting academic medical center would focus on value-based care, population health and translational science.
"We are eager to bring this shared vision for our future to life with Atrium Health," said Julie Ann Freischlag, CEO of Wake Forest Baptist Health and dean of Wake Forest School of Medicine. "It's incredible to think about the impact we can make, together, advancing patient-centered research, a next-generation curriculum and active population health analytics across our combined footprint. We can create amazing outcomes that embrace true change — most importantly enhancing, extending and saving the lives of countless people."
In its 2018 earnings report, Wake Forest Baptist said it expects to spend about $540 million on capital projects over the next three years. The health system reported $2.85 billion in operating revenue in 2018, up from $2.67 billion the year prior. Both Wake Forest and Atrium saw increases in net patient revenue due to higher reimbursements, though Wake Forest expressed concern over potential losses it will incur from disproportionate share hospital cuts.
Atrium has yet to release its full-year earnings for 2018. The health system posted $4.65 billion in operating revenue for the first nine months of 2018, up from $4.45 billion the year prior. Those gains were driven by sales in specialty pharmaceuticals, according to its third quarter 2018 earnings report.
Atrium was one of six companies participating in Amazon's invitation-only program for developing HIPAA-compliant features for the Alexa smart speaker. The system's skill allows people to find an urgent care center near them and schedule a same-day appointment.
Follow Tony Abraham on Twitter