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Our Take: Froedtert Health and ThedaCare move closer to combining, two other mergers are completed

Sep 11, 2023

Two nonprofit health systems in Wisconsin — Milwaukee-based Froedtert Health and Neenah-based ThedaCare — are moving forward with the merger plans they announced in April. 

The boards of both health systems approved a definitive agreement specifying the terms of the merger. The goal at this point, according to a news release, is to launch the combined health system at the start of 2024. Customary closing conditions still need to be met and regulatory approval will be required.

The two organizations began partnering with each other last year on a pair of initiatives designed to increase access to care, one of which is a quaternary partnership that includes the Medical College or Wisconsin. They signed a letter of intent earlier this year.  

The combined system would have 18 hospitals and would serve the central, northeast, and southeast regions of the state. 

The plan is for Cathy Jacobson, Froedtert’s president and CEO, to serve as the initial CEO of the merged health system and for Dr. Imran Andrabi, ThedaCare’s president and CEO, to serve as president. After a six-month transition period, Jacobson will retire and Dr. Andrabi will take on the additional role of CEO.

Financial terms have not been disclosed. 

Meanwhile, Billings Clinic and Logan Health announced that, as of Sept. 1, they are officially one health system serving patients across Montana and Wyoming. 

The two Montana-based, not-for-profit health systems revealed in February that they had signed a nonbinding letter of intent to explore the possibility of combining. Now that they’ve made it official, the integration process is expected to take 12 to 24 months. 

The combined system has 1,200 physicians and advanced practice providers, 1,000 hospital beds, 9,000 employees, and another 3,000 employees at affiliated organizations. 

In a statement published on Aug. 3, Dr. Clint Seger, CEO of Billings Clinic, said the combined system “will be focused on connecting the rural communities between us and around us to improve care coordination while striving to keep care as locally as possible.”

Logan Health’s CEO, Dr. Craig Lambrecht, is now CEO of the combined system and Dr. Seger is chief physician executive. There has been no indication of a name change for the combined system or its sites of care and affiliated locations. 

And on Aug. 30, Marietta, Ga.-based Wellstar Health System officially combined  with Augusta (Ga.) University Health System, which is now known as Wellstar MCG Health. (MCG stands for Medical College of Georgia.) 

As part of the deal, Wellstar has committed to investing nearly $800 million in Augusta University Health’s facilities over the next decade. Wellstar said it would also work closely with the Medical College of Georgia to bring more clinicians to the state. 

The newly combined health system has 12 hospitals. 

Our Take: At a time when health system mergers are facing increased scrutiny by lawmakers, advocacy groups, and regulatory officials at the state and federal level, smaller regional health systems like these seem to be having more success in finalizing their deals.

That’s probably because it’s easier for them to demonstrate that they are merging to improve access to care, improve quality of care, reduce disparities in care, and increase efficiencies in their operations. 

While larger health systems may say they are merging for the same reasons, they are more likely to experience pushback from regulators, key stakeholders, and even patients. 

There tends to be more concern that mergers between larger systems could allow the resulting organization to monopolize the market it serves and drive up costs. 

Another reason state and local officials may be more willing to approve regional mergers — especially those serving rural areas — is that combining forces is sometimes their best chance of keeping the doors open. 

The odds of Providence or Advocate Health folding are slim, but more than 150 rural hospitals shut down between 2005 and 2019, according to a report released in July by the Center for Healthcare Quality and Payment Reform, and 18 more closed in 2020. 

A total of 10 rural hospitals closed in 2021 and 2022, the report noted, but the authors attributed the reduction in closures to the financial assistance hospitals received from the federal government during the pandemic. 

Now that federal assistance is no longer available, more than 600 rural hospitals, or over 30% of all rural hospitals in the U.S., are at risk of closing, half of them at immediate risk. 

What else you need to know
Rite Aid is preparing to file for Chapter 11 bankruptcy, according to multiple news sources. Doing so would give the drugstore chain — the third largest in the U.S. — an opportunity to consolidate and resolve pending legal claims regarding the company’s purported role in fueling the opioid crisis, Reuters reported, citing The Wall Street Journal as its source. Along with carrying $3.3 billion in debt, Rite Aid is facing a barrage of federal and state lawsuits, as well as a civil case the Department of Justice filed in March. The lawsuits accuse Rite Aid of unlawfully filling hundreds of thousands of prescriptions for painkillers, including opioids. The company has denied the allegations and — unlike other pharmacies, drug companies, and distributors — it has not agreed to a nationwide settlement. Although Rite Aid has not commented on the bankruptcy rumors, it has closed dozens of stores this year, including several abrupt closures in the last few weeks. The chain has approximately 2,200 locations in 17 states.

Humana’s CenterWell Senior Primary Care has begun offering in-home primary care services in several cities in Georgia and Louisiana through the new CenterWell Primary Care Anywhere program. The expanded services are an upshot of Humana’s acquisition in January of Los Angeles-based Heal, a doctor-on-demand startup Humana partnered with and invested $100 million in back in 2020. With this expansion, patients in Atlanta can receive primary care services in their home or at a local CenterWell primary care center for the same copay, according to a press release. When CenterWell opens primary care centers next year in New Orleans and Baton Rouge, patients in those cities will have the same option. CenterWell is offering the Primary Care Anywhere program to members of various Medicare Advantage health plans that contract with the company and enrollees of traditional Medicare. A spokesperson told Healthcare Dive the program could eventually expand into 10 additional states in the South and Southwest. 

CMS unveiled a new all-payer model to help states improve population health through better care delivery and reduced health disparities. The voluntary States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model is designed to better address chronic disease, behavioral health, and other medical conditions, CMS said in its press release. “Under the AHEAD Model, participating states will be better equipped to promote health equity, increase access to primary care services, set health care expenditures on a more sustainable trajectory, and lower health care costs for patients,” the agency noted. Participating hospitals and primary care practices can use payment models within the AHEAD Model to achieve the model’s goals, which include improving care coordination for Medicare and Medicaid beneficiaries and increasing screenings and referrals to community resources that address social drivers of health, such as housing and transportation. As many as eight states will be selected to participate in the model and will receive up to $12 million to support implementation. The AHEAD Model — which is similar to Maryland’s program for paying hospitals — is scheduled to run for 11 years. 

Health care technology vendor NextGen Healthcare entered into a definitive agreement to be acquired by software investment firm Thoma Bravo. NextGen Healthcare shareholders will receive $23.95 per share in cash, the companies said in a news release, giving the deal an estimated value of $1.8 billion, including debt. The purchase price reflects a 46% premium to the closing price of NextGen Healthcare’s stock on Aug. 22. The transaction is expected to close in the fourth quarter, at which time NextGen Healthcare will become a privately held company. If the deal is not completed, NextGen Healthcare will pay Thoma Bravo a $41.2 million termination fee, according to an SEC filing. The acquisition is subject to customary closing conditions, including shareholder and regulatory approval.

Rosalind Brewer stepped down as CEO of Walgreens Boots Alliance on Aug. 31, a role she took on in March 2021. She also relinquished her position as a member of the board but will continue to advise the company during its search for a new CEO “with deep health care experience,” according to the announcement. Brewer’s background as a senior executive at Starbucks and Sam’s Club is more retail-focused. Ginger Graham, a WBA board member since 2010 and lead independent director since October, will serve as interim CEO. Walgreens is also looking for a chief financial officer, after James Kehoe left in mid-August to become the CFO at technology solutions provider FIS.   

CVS Health also made some changes among its senior leadership. The company announced Thursday that CFO Shawn Guertin has taken on the additional role of president of health services, a business unit that includes Oak Street Health and Signify Health, along with MinuteClinic; Chief Pharmacy Officer Premium Shah is now the sole president of pharmacy and consumer wellness instead of co-president of the unit; and Brian Kane has joined the company as Aetna’s president. Kane previously served as CFO of Humana. 

AmerisourceBergen is now officially Cencora. The Conshohocken, Pa.-based pharmaceutical sourcing and distribution services company was formed in 2001 when AmerisourceBergen Health Corp. merged with Bergen Brunswig Corp. The company said in a press release it is unifying its 46,000 employees across multiple global business segments under the Cencora identity. Accordingly, the AmerisourceBergen Foundation, an independent not-for-profit charitable organization, has been renamed Cencora Impact Foundation, and the company’s corporate venture fund, AB Health Ventures, is now Cencora Ventures. 

What we’re reading 
The Health Care Provider Pricing Policy Puzzle. Health Affairs, 9.7.23

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