The Midwest organizations called off the move to create a 25-hospital health system.
Another merger bites the dust. This time, with little (known) scrutiny from the Federal Trade Commission (FTC). So why did Wisconsin-based Marshfield Clinic Health System and Minnesota-based Essentia Health abandon their proposed union?
According to an announcement put out by the organizations, the decision was a mutual call—one made nearly six months after they signed an integration agreement in July to form a 25-hospital health system serving Wisconsin, Minnesota, Michigan and North Dakota.
“We have decided that a combination at this time is not the right path forward for our respective organizations, colleagues and patients,” Marshfield Clinic interim CEO Brian Hoerneman and Essentia Health CEO David Herman said in the release.
Despite the merger falling apart, the systems shared that they’ll still look to work together going forward.
“We will continue to seek opportunities for collaboration as two mission-driven, integrated health systems dedicated to sustainable rural health care,” they said. “Our organizations have great respect for one another, and we each remain committed to strengthening the health of our communities as we deliver high-quality, compassionate patient care.”
The proposed merger was first announced in October 2022 and the systems expected the deal to close at the end of 2023, pending regulatory approval. In October 2023, Minnesota Attorney General Keith Ellison stated this his office would review the deal’s compliance with state and federal antitrust laws.
This marks the second occasion Marshfield Clinic has been involved in a potential merger that was eventually called off in the past four-plus years. In December 2019, the organization and Gundersen Health System chose to not follow through on a deal that would have created a 13-hospital system.
Through the first nine months of 2023, Marshfield Clinic reported an operating loss of $133.6 million, compared to an operating loss of $92.6 million over the same period in 2022. While operating revenue increased from $2.28 billion to $2.32 billion, expenses also jumped 3.5% to $2.5 billion.
Essentia, meanwhile ended fiscal year 2023 with $121.7 million in net income, a significant increase from the $72 million in net loss in 2022.
Though the FTC wasn’t publicly involved in evaluating the merger between the systems, the agency has had its hand in several other deals recently. According to the FTC and Department of Justice’s recently released Hart-Scott-Rodino Report, 50 merger enforcement actions were filed in fiscal year 2022, which was the most since 2021.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
Essentia Health and Marshfield Clinic Health System announced they’ve dissolved their merger after signing an integration agreement in July last year.
The only regulatory pressure made public about the deal was by Minnesota Attorney General Keith Ellison, who stated in October that his office would review the deal.