Ochsner, Lafayette General Expect to Close Merger Deal by 2020
The health systems in Louisiana recently signed a letter of intent to engage in a hospital merger deal that would create a 33-hospital system by spring of next year.
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By - Louisiana-based Ochsner Health System and Lafayette General Health announced on Wednesday their intentions to merge in a deal that would create the largest and most comprehensive health system in the Gulf South.
The board of trustees of both health systems signed a letter of intent to create a 33-hospital system with 139 clinicians across southern Louisiana. Both parties have now entered a period of due diligence but expect a final merger by the spring of 2020.
“Lafayette General is a tremendous health system known for high quality care and an extraordinary commitment to patients,” Ochsner board of directors chairman Andrew Wisdom stated in the announcement. “We are proud of what we’ve been able to accomplish through our four-year affiliation, but we know we have only scratched the surface of what we can do together to strengthen access to services in the region and across the state.”
Louisiana was ranked as the least healthy state last year, according to Lafayette General’s board of trustees chairman David Wilson. “By combining our resources and talent, we will be able to provide better access to healthcare here in Acadiana and to continue growing our local economy,” he said in the announcement.
As part of the merger deal, Ochsner agreed to invest $365 million in capital and resources in Acadiana over the next ten years. The funding will go toward a number of merger initiatives, including more than $50 million for expanding and enhancing clinical services to address the critical health needs of the region’s residents, the health systems reported.
“Our aim is to enhance and expand services for Southwest Louisiana, so that people in Acadiana do not have to leave the area for services. We will work to expand sub-specialty care, especially in pediatrics and oncology,” John Schutte, MD, a member of the Lafayette General Health Board of Trustees and a practicing orthopedic surgeon, explained in the announcement.
The services will also be available for all patients regardless of their insurance coverage or ability to pay, the health systems noted.
Employees of Lafayette General will also benefit from the merger deal, according to the announcement. By partnering, the two health systems intend to strengthen training and education for Lafayette General employees, providers, and caregivers by using Ocshner’s investment to support graduate medical education and add 48 residency positions.
Minimum pay for employees at Lafayette General facilities will also increase by nearly $2 to $12 per hour across the system. The increase in pay will impact about 800 employees, the announcement stated.
Lafayette General has recent faced significant financial hardships. Earlier this year, the health system threatened to shutter one of its facilities because of a lack of state funding, local news sources reported. A budget deal struck with the state of Louisiana, however, enabled the health system to keep the facility and its residency program open.
“The reality is that the healthcare industry is fundamentally changing and creating challenges for healthcare providers – especially health systems of our size,” Lafayette General president David L. Callecod, FACHE, said in the merger announcement. “Now is the time to make proactive decisions to fulfill our mission and allow us to thrive well into the future.”
New research from the American Hospital Association (AHA) suggests that a merger deal like the one between Ochsner and Lafayette General could help improve care. The report prepared by Boston-based consulting firm Charles River Associates found that annual operating expenses and revenues per admission fell at acquired hospitals following a merger.
The firm also observed statistically significant improvements in outcome measures of quality at acquired hospitals, including decreases in the 30-day readmission rates composite index, 30-day mortality rates composite index, and the overall outcome composite index.
Industry experts, however, have questioned the AHA’s findings and presented their own research demonstrating the negative consequences of hospital mergers and acquisitions, including higher prices for consumers and less incentive to improve care quality.
But leaders at Ochsner and Layfette said their merger deal is part of a larger movement. They noted in the announcement that hospitals announced 307 partnership transactions in the last three years.
“Industry headwinds require significant expertise, resources and scale for health systems to succeed and to meet the evolving needs of their communities,” the announcement stated.
Leaders of both health systems remain confident that the merger is the right step for healthcare in their region.
