Our Take: Missouri’s BJC Healthcare, St. Luke’s announce plans to integrate, forming a $10 billion health system
Two Missouri health systems — St. Louis-based BJC Healthcare and Saint Luke’s Health System of Kansas City — plan to combine and form an integrated academic health system with 28 hospitals and an enterprise value of approximately $10 billion.
The nonprofit organizations signed a nonbinding letter of intent, which was unanimously approved by both boards of directors.
“Amid the rapidly changing health care landscape, this is the right time to build on our established relationship with Saint Luke’s,” said Richard Liekweg, BJC Healthcare’s CEO. “With an even stronger financial foundation, we will further invest in our teams, advance the use of technologies and data to support our providers and caregivers, and improve the health of our communities. These are opportunities that we can better achieve together.”
“Through our decade-long relationship as a member of the BJC Collaborative, we’ve established mutual trust and respect, so the opportunity to come together as a single integrated system that can accelerate innovation to better serve patients is a logical next step,” said Dr. Melinda Estes, CEO of St. Luke’s.
The plan is for the integrated health system to operate from dual headquarters and to maintain the existing brands in the distinct markets the two health systems currently serve. The headquarters in St. Louis would serve eastern Missouri and southern Illinois, and the headquarters in Kansas City would serve western Missouri and part of Kansas.
Liekweg would serve as CEO of the integrated health system, and the initial board chair would be someone from St. Luke’s.
Each of the health systems has 14 hospitals. BJC Healthcare’s two academic hospitals, Barnes-Jewish and St. Louis Children’s, are affiliated with the Washington University School of Medicine.
The organizations said in their announcement that they are working toward reaching a definitive agreement in the coming months and expect to close by the end of 2023.
The transaction is subject to regulatory approval.
Our Take: Regulators may give the deal a once-over, but most who’ve weighed in on the speculative merger so far don’t believe there will be any hiccups. Geographic overlap has been the main obstacle that has prevented several large health system mergers and acquisitions in the last few years, and there is none between BJC and St. Luke’s.
Still, as they pointed out in their announcement, BJC and St. Luke’s operate the top three hospitals in Missouri, according to U.S. News & World Report — and this planned integration qualifies as consolidation, a term that typically triggers concerns at the Federal Trade Commission, as well as some state agencies.
The health systems also took efforts to imply that, at least on the outside, little will change: they’ll keep both headquarters and continue to serve their respective “distinct” markets through their existing brands.
BJC and St. Luke’s have already been working together with other health systems in the area for more than a decade through the BJC Collaborative to “achieve financial efficiency and share best practices while remaining independent.”
Although they alluded to the “rapidly changing health care landscape” in their announcement, they didn’t specifically mention any pandemic-related challenges or fallout from inflation as motivation for taking their collaboration to this next level.
In a prepared FAQ document, they said this is an opportunity “to become a patient-first regional health care system with resources to innovate and more effectively improve the health and well-being of the communities we serve.”
They also mentioned advancing their “shared mission to improve population health and expand access to extraordinary patient care, with a best-in-class integrated model to attract, retain, and train exceptional talent,” as well as advancing “medical breakthroughs by expanding access to clinical trials and accelerating innovation in patient care.”
The St. Louis Post-Dispatch said the deal would be “the largest local hospital merger in recent memory.”
In the Post-Dispatch article, Louise Probst, executive director of the St. Louis Area Business Health Coalition, said, “We haven’t see a cross-market merger of two large health systems in this region before. It probably won’t be the last.”
What else you need to know
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