Intermountain-Sanford Deal Off, Other Healthcare Merger News
Intermountain and Sanford Health have stopped a potential healthcare merger amid executive changes, while the FTC tried to block a proposed acquisition in New Jersey.
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By - Just weeks after announcing a potential healthcare merger deal, Utah-based Intermountain Healthcare and Sanford Health based in South Dakota have called off all talks about the deal.
The announcement released December 4 said the health systems have “indefinitely suspended conversations” after Sanford Health’s president and CEO Kelby Krabbenhoft exited the health system late last month. Sanford said it had decided to pause all healthcare merger and acquisition activity shortly after it appointed Bill Gassen as the system’s new leader.
“With this leadership change, it’s an important time to refocus our efforts internally as we assess the future direction of our organization,” said Gassen. “We continue to prioritize taking care of our patients, our people, and the communities we serve as we look to shape our path forward.”
Krabbenhoft, who served as Sanford’s leader for 25 years, was tapped to serve as president emeritus of the proposed combined health system. The former executive, however, recently faced criticism over an email he sent to staff saying how he would not wear a mask after recovering from COVID-19. The health system’s board and Krabbenhoft “mutually agreed to part ways” after the incident.
In a November 25 letter to the community, Glassen stated that the former CEO’s opinions about COVID-19 created frustration and disappointment among staff and “do not represent our values and principles as health care providers.”
READ MORE: 10 Major Healthcare Merger & Acquisition Deals Announced in 2020
The proposed healthcare merger deal would have created a 69-hospital system with an additional 435 clinics and 366 senior care sites across 24 states. The system would have also insured 1.1 million people.
Marc Harrison, MD, president and CEO of Intermountain, was slated to serve as the combined health system’s leader, with Gail Miller, current chair of the Intermountain Board, will serving as board chair.
“We are disappointed but understand the recent leadership change at Sanford Health has influenced their priorities,” said Harrison in the latest announcement. “There’s much to admire about the work that Sanford Health is doing. We continue to share a strong vision for the future of healthcare.”
The proposed Intermountain-Sanford deal is another in a string of deals abruptly called off. Just recently, Advocate Aurora Health and Michigan’s Beaumont Health halted merger talks five months after signing a non-binding letter of intent to merge. The health systems said they decided to part ways after physician leaders voiced opposition to the proposed deal, even sending out a no-confidence petition over the summer calling for the exit of Beaumont’s top executives.
However, the unrealized deals have not slowed healthcare merger and acquisition activity, even during the COVID-19 pandemic. Activity remains high as hospitals and health systems seek out greater efficiencies and larger networks of providers for their patients.
READ MORE: How Hospital Merger and Acquisition Activity is Changing Healthcare
But research has shown that healthcare mergers and acquisitions can lead to higher prices for consumers, as well as little to no quality of care benefits. This has prompted government officials, including the Federal Trade Commission (FTC), to scrutinize proposed healthcare merger and acquisition deals more closely.
The FTC recently sued Hackensack Meridian Health, Inc. in New Jersey over a proposed acquisition deal with another local health system, Englewood Healthcare Foundation. The agency alleges that through the deal, Hackensack would control three of the six inpatient general acute care hospitals in Bergen County, New Jersey, leaving insurers with few alternatives for the wide range of services, including surgical diagnostic and treatment procedures.
“This acquisition would give the combined hospital system increased bargaining leverage, likely leading to increased prices,” said Ian Conner, Director of the FTC’s Bureau of Competition. “The transaction would also remove the competitive pressures that have driven these hospitals to invest in quality improvements to the benefit of patients.”
The agency also recently filed a lawsuit attempting to block the sale of two hospitals in Tennessee over similar anti-competition concerns.
The lawsuits may signal the FTC’s growing interest in assessing the competitive impacts of healthcare merger and acquisition deals. While this has been a priority as of late, the government may pick up speed under a revitalized Merger Retrospective Program and the potential leadership of California Attorney General Xavier Becerra, who President-elect Joe Biden recently said he will nominate for HHS Secretary.
READ MORE: How FTC’s New Merger Retrospective Program Will Impact Healthcare
Becerra has a long history of challenging healthcare merger and acquisition deals in California, including a proposed deal between Adventist Health System/West and St. Joseph Health System. The Attorney General also sued Sutter Health over anti-trust concerns, leading to a $575 million settlement between the health system and the state.
Healthcare merger and acquisition activity though is likely to continue at a rapid pace as providers struggle to overcome the financial losses stemming from the ongoing COVID-19 pandemic.
