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Sanford Health calls off merger with Intermountain Healthcare

The decision was reportedly due to a change in leadership at Sanford Health, due to its former CEO leaving after refusing to wear a face mask.

Jeff Lagasse, Associate Editor

Photo courtesy of Sanford HealthPhoto courtesy of Sanford Health

A proposed merger in 2021 between Intermountain Healthcare and Sanford Health, announced in October, is now on hold indefinitely after Sanford cut ties with its former CEO Kelby Krabbenhoft over his refusal to wear a face mask.

Sanford Health split with former president and CEO Kelby Krabbenhoft in late November after a controversial email from Krabbenhoft alerted his staff that he wouldn't wear a mask because he'd already had COVID-19. The health system parted ways with Krabbenhoft soon thereafter and appointed Bill Gassen as president and CE. Gassen most recently served as chief administrative officer and has been with the organization since 2012.

"Given the leadership change, Sanford Health has decided to pause current merger and acquisition activity while they address other organizational needs," Sanford Health said by statement.

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Gassen said, "With this leadership change, it's an important time to refocus our efforts internally as we assess the future direction of our organization." He added, "We have great respect for Intermountain Healthcare, Dr. Marc Harrison, and their leadership team and look forward to continuing to learn from each other."  

"We are disappointed but understand the recent leadership change at Sanford Health has influenced their priorities," said Dr. Marc Harrison, president and CEO of Intermountain Healthcare. "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." 
 
WHAT'S THE IMPACT?

Krabbenhoft had been tapped to serve as president emeritus of the combined organization, with Gail Miller, the current chair of the Intermountain board, serving as board chair, and Intermountain President and CEO Dr. Marc Harrison serving as president and CEO. The new entity was to be headquartered in Salt Lake City, with corporate offices in Sioux Falls, and would have employed more than 89,000 people across 70 hospitals, 435 clinics and 366 senior care facilities.

In the email that sparked the controversy and eventually led to his resignation, Krabbenhoft said that "for me to wear a mask defies the efficacy and purpose of a mask and sends an untruthful message that I am susceptible to infection or could transmit it. I have no interest in using masks as a symbolic gesture." He cited "growing evidence" that once someone contracts COVID-19, they become immune to it.

Following those remarks, Sanford Health issued a series of tweets disputing Krabbenhoft's claims, saying they "do not reflect the views of our health system as a whole." The system said consistent mask-wearing is critical to preventing the spread of the coronavirus.

There have been cases of COVID-19 reinfection, although they are rare, according to the Centers for Disease Control and Prevention. The CDC recommends that people wear masks, social distance and practice good hygiene regardless of past infections.

THE LARGER TREND

So far this year, healthcare merger and acquisition activity has been down, primarily as a result of COVID-19. The second quarter of 2020 saw M&A activity drop 20% from the first quarter and 34% when compared to Q2 of 2019, according to Irving Levin Associates.

Not only were there fewer mergers and acquisitions in Q2, but the ones that did occur were worth less than those in Q1 2020 and Q2 2019, according to S&P Global Market Intelligence. The aggregate transaction value of the M&As in Q2 was $12.26 billion, compared to $29.31 billion in Q1, and $137.29 billion in the second quarter of 2019.

Despite Q2 being the lowest quarter as far as M&A activity in five years, analysts at Waller and Kaufman Hall predict that the pent-up M&A activity from the pandemic will "very likely" cause a surge of M&As moving into 2021. They predict that M&As will be particularly active among small and independent hospitals looking to partner to stay afloat.

Intermountain recently acquired Saltzer Health, a physician group in Idaho, in October. Last year, the system also acquired HealthCare Partners Nevada.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com