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Sanford Health, UnityPoint Health call off plans for $11 billion merger

No reason was given for the decision, which negates plans that would have resulted in a system ranking among the biggest U.S. nonprofits.

Jeff Lagasse, Associate Editor

UnityPoint corporate offices in West Des Moines, Iowa. (Google Earth)UnityPoint corporate offices in West Des Moines, Iowa. (Google Earth)

Midwestern health systems UnityPoint Health and Sanford Health had signaled in June that they would pursue a merger that would have resulted in a mega-system worth a combined $11 billion in revenue. This week, plans for the merger were called off.

According to the Duluth News Tribune, it was UnityPoint that ultimately called off the merger. In a statement posted on its website, UnityPoint CEO Kevin Vermeer said the two organizations were both "high-performing systems" with "unique strengths and cultures," and said they would work together in the future to benefit the systems' respective communities. Vermeer did not disclose the reason for calling off the merger.

Sanford CEO Kelby Krabbenhoft, in a statement published by KCCI Des Moines, said he was "disappointed" by the UnityHealth board's decision.

WHAT'S THE IMPACT

If the two organizations had finalized the deal by the end of the year as anticipated, the new entity would have ranked among the top 15 largest nonprofit health systems in the country. Krabbenhoft would have served as president and CEO, while Vermeer would have served as senior executive vice president.

UnityPoint runs 32 hospitals and is linked to 280 physician clinics throughout Iowa, southern Wisconsin and western Illinois, according to KCCI. Sanford Health encompasses 44 hospitals, 1,400 physicians and more than 200 Good Samaritan Society senior care locations spread across 26 states and nine countries.

The merged organization would have employed more than 83,000 people, 2,600 of them physicians.

Earlier this year, Sanford Health successfully merged with The Evangelical Lutheran Good Samaritan Society national senior care facilities operator, and in 2009 merged with the Fargo-based MeritCare Health System, according to the News Tribune.

THE LARGER TREND

While figures for the third quarter of this year are still being tabulated, second quarter numbers show an increase in the number of so-called "mega-mergers" in healthcare.

The total number of transactions involving hospitals and health systems dropped in the quarter, but the size of the mergers and acquisitions announced pushed total transacted revenue to its highest levels since 2017, according to Kaufman Hall.

The numbers for the quarter show the furthering of a trend toward mega-mergers, a shift expected to continue into the future. Driven in part by hospitals and health systems assuming more risk, uncertainty permeates the industry, with vulnerable organizations seeking alignment with more sustainable platforms. Stronger organizations are attracted to new revenue streams and expansion into new regions. M&A has proven helpful for both groups.

ON THE RECORD

"You may be wondering how this decision impacts you or your families," said Vermeer in an open letter to patients. "To some degree, it doesn't -- we will continue to be a people-first organization. As your partner in health, we will work to provide the right complement of services to all our communities. Our physicians, team members, hospitals and home care entities are whole-heartedly committed to making your entire healthcare journey easier and more personal."
 

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com