Two large health systems revealed plans to merge last week in a blockbuster deal that could signal more transactions to follow for hospitals and surgery centers.
Charlotte, N.C.-based Atrium Health and Advocate Aurora Health, based in Milwaukee and Downers Grove, Ill., plan to combine into a 67-hospital health system with about 158,000 employees. The two health systems cited digital transformation, innovation, health equity and creating the workforce of the future as centerpieces of the deal. As a larger organization, the new health system, which would be called Advocate Health, would better address health equity and "launch game-changing innovations," according to Eugene Woods, Atrium's CEO.
The merger, which is subject to regulatory review, would create a $27 billion system to address challenges in healthcare with huge economies of scale.
Healthcare providers big and small are watching the large systems consolidate and wondering what it means for the industry. It's clear healthcare has become more digital through virtual care, precision medicine and EHRs, and data has become the new economy of the healthcare system. Insurers require it as part of value-based care contracts, and it will be necessary, even for small ASCs and physician practices, to go digital to keep up.
Workforce challenges are also likely here to stay, with the nurse shortage worsening and inflation making it hard for hospitals to keep up with expenses. Two New York-based hospitals, Claxton-Hepburn Medical Center in Ogdensburg and Carthage (N.Y.) Area Hospital, laid off 4 percent of their workforces in mid-May, citing inflation. The hospitals said costs increased 30 percent while revenue dropped 2.7 percent.
Hospitals that are part of a larger system, such as the one that could be created by a Atrium-Advocate merger, have a larger support system to weather financial challenges and modernize to cut costs. The same is true for ASCs; surgery centers that are part of a larger group or chain have more resources during times of extreme financial strain.
The next 12 months could bring more large deals to the table as healthcare providers tackle higher costs, labor shortages, digital transformation and more.