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Can a merger bring 'reimagined' health?

To vie as a purveyor of advanced and tech-savvy care, two health systems are shoring up their strengths

Two health systems set to merge want to “reimagine” healthcare and bring it to the masses, and in a fairly crowded metropolitan area they need economies of scale.

In Philadelphia, Abington Health and Jefferson Health System are moving forward with an intent to merge. The organizations’ boards are giving themselves until early next year to craft a definitive agreement that, if it goes through, will create the region’s largest health system, surpassing the University of Pennsylvania Health System, which along with Jefferson is a main purveyor of advanced and experimental therapies and acute care.

Abington Health includes Abington Memorial, a 665-bed teaching hospital, a 135-bed hospital in Lansdale acquired in 2008 and five outpatient facilities. Jefferson, a five hospital facility flanked by the 950-bed Thomas Jefferson University Hospital, is the larger of the two providers, and its CEO, Stephen Klasko, MD, will lead the new system. But the merger will be a merger, not an acquisition, with a shared governance model, the organizations said.

The integration will be two “organizations coming together as equals,” said Laurence Merlis, president and CEO of Abington Health. “It means doing so in a way that leverages the excellence of our two well established healthcare organizations, in the city and the suburbs.”

"We simply believe that the region deserves a reimagined healthcare system, where patients get the best care closest to where they live," said Klasko, president and CEO of Thomas Jefferson University and Jefferson Health System.

An eastern Pennsylvania native, practicing ob-gyn and MBA who dabbles in science fiction writing, Klasko came to Jefferson last year after a decade as dean of the University of South Florida medical school — with big ideas for using technology and decentralization to change how healthcare is delivered and managed in the 21st century. "We're going to change the DNA of healthcare one physician at a time," Klasko said at a recent TED Talk, outlining a vision for “Jefferson 3.0.”

Jefferson's multi-speciality center at the Philadelphia Navy Yard corporate park, opened in 2012Less than a year after taking the helm of Jefferson, Klasko secured a $110 million donation to the university from fashion industry billionaire and Philly native Sidney Kimmel, the fifth-largest gift ever to a medical school. Jefferson also recently bought the naming rights to a downtown train station, where thousands of workers commuting from the suburbs and outer neighborhoods pass through each day.

The merger with Abington could help extend the reach of the type of clinical research and advanced care supported with the endowment, Klasko said. 

“We are two like-minded organizations that share the same philosophy, culture and commitment to patients, physicians, faculty, employees, students and the community," he said. "Each organization delivers clinically excellent care, trains and educates medical and healthcare professionals and takes part in vital research.”

New type of organizational integration

The plans for an Abington-Jefferson merger does come just half-a-year after Jefferson ended a 19-year financial partnership with Main Line Health, a health system serving Philly’s southwest suburbs. While Jefferson and Main Line are continuing a medical training program, the end of joint insurance contracting and debt issuance marked the end of an organizational integration that would seem to resemble the basic idea for Abington and Jefferson’s merger.

Jefferson and Main Line leaders “collectively realized that the existing corporate structure needs to be changed to allow us to be more entrepreneurial, nimble, and responsive,” Klasko said in March.

The Abington-Jefferson merger could be different, though, and allow for both the kind of efficiencies sought in the 1990s and the kind of evolution and reengineering leaders like Klasko have in mind for the coming decades. “Central to the plan is the development of a shared governance model that will serve as the foundation for innovation within this new health care organization,” Abington and Jefferson said.

Abington Memorial Hospital“The shared governance structure is a first in Philadelphia, and we expect, a model for discussion nationally as we all move forward in a landscape defined by healthcare reform and the changing needs and demands of healthcare purchasers," Klasko said.

In a region with more than a dozen health systems, physicians groups and independent hospitals — and one large commercial insurer — Abington has been looking for an organizational partner for some time. In 2012, the idea of merging with Holy Redeemer Health System, which has a sizable home health business, fell through after Abington physicians and patient advocates raised concerns about the hospital’s adherence to Catholic doctrine on reproductive services. (Photo: A main wing of Abington Memorial Hospital.)  

Jefferson and Abington are both on solid financial footing, unlike some health systems in Philly and elsewhere. In fiscal year 2013, Jefferson posted a net income of more than $100 million, on revenue of $2.1 billion, while Abington brought in a gain of $17 million on revenue of $774 million.

In the new system, Jefferson and Abington will have equal representation on a combined board, with a few independent trustees. Both organizations will be present in the yet-to-be determined name, as well.