Dive Brief:
- Michigan-based Beaumont Health and Ohio-based Summa Health have signed a definitive agreement in which Summa will become a wholly owned subsidiary of Beaumont, the nonprofit health systems announced Monday.
- The two organizations, which signed a letter of intent in July, now wait for approval from federal and state regulators before the transaction closes, which the organizations predict will happen in the first quarter of this year.
- The merger will give Beaumont a foothold in Northeast Ohio and put it in direct competition with academic medical center Cleveland Clinic.
Dive Insight:
The deal between Beaumont and Summa certainly isn't unique as rampant consolidation continues in the provider sector. By the third quarter last year, hospital and health system M&A activity was on pace to be slightly ahead of 2018's volume, according to a report from Kaufman Hall.
Hospitals contend that mergers cut costs and improve health outcomes. But critics say the deals lead to market concentration, giving some health systems outsized power in negotiations with payers and contributing to rising healthcare prices.
A study published last week in the New England Journal of Medicine found that hospital consolidation was associated with poorer patient experiences and no change in 30-day mortality or readmission rates.
The combined Beaumont and Summa organization will have 45,000 employees, more than 6,000 affiliated physicians and $6.1 billion in total annual revenue: $4.7 billion from Beaumont and $1.4 billion from Summa.
Beaumont is Michigan's largest healthcare system, with eight hospitals, 145 outpatient sites and about 38,000 employees. Meanwhile, Summa is an integrated health system with four hospitals and a health plan, SummaCare, which provides coverage for 46,000 people.
The organizations plan to buy out Cincinnati-based Mercy Health's 30% stake in Summa. For its part, Mercy merged with Maryland-based Bon Secours in 2018, creating the nation's fifth-largest Catholic health system.
Beaumont and Summa officials said the combined organization plans to fund significant capital and operating projects in Michigan and Ohio. Summa will retain local control.
"The planned addition of Summa will allow us to serve more people and become a regional health care leader. The efficiencies from transactions of this nature enable us to directly support our medical personnel who provide care ultimately to benefit the patients we serve," Beaumont Board Chair John Lewis said in a news release.
Summa Health announced last year that it was actively seeking a partnership or merger with another health system. Summa announced these plans from a position of financial strength having reported a $40-million turnaround in the first half of 2018 following a series of losses.