If they agree to merge, a merger would produce a system with 25 hospitals and over 26,000 employees. The deal comes during a fairly slow period for hospital consolidations.
Essentia Health and the Marshfield Clinic Health System have begun talks that could lead to a merger.
The two health systems said this week they had signed a memorandum of understanding to explore how the two systems could come together to create a regional health system.
If Essentia and Marshfield Clinic merge, it would create a system of 25 hospitals and over 26,000 employees. The systems said in a statement that they could improve healthcare for patients and offer “complimentary geographies and capabilities.”
Essentia operates 14 hospitals as well as dozens of clinics in Minnesota and North Dakota, as well as a few locations in Wisconsin. Essentia employs over 14,000 people.
Marshield Clinic operates 11 hospitals and other care sites in the Upper Peninsula of Wisconsin and Michigan. The system employs over 12,000 workers.
The two organizations said the memorandum of understanding represents the first step towards a possible merger, but they did not share a timeline for future plans. Systems said more information would be released later.
Essentia CEO Dr. David Herman said he has respected the work of the Marshfield Clinic for decades.
“I have always appreciated their ability to advance the well-being of the communities they serve,” Herman said in a statement. “I am truly delighted to be working together for the benefit of our patients and our colleagues.”
The two organizations also share similar values, he said. “Through a new partnership, we can support models of care, services, research and technologies to ensure sustainable and thriving rural health care,” Herman said.
“This is an exciting opportunity for both our organizations and those we serve,” Marshfield Clinic Health System CEO Dr. Susan Turney said in a statement.
“These are two of the nation’s leading health systems, seeking to come together to serve rural communities and beyond,” she said. “When I look at Essentia, I see an organization with world-class expertise that complements ours. And I see their long and storied history of serving communities with a mission very similar to ours at Marshfield Clinic Health System.
The organizations said in a press release that a merger would provide expanded primary and specialty care opportunities for patients.
Essentia and Marshfield Clinic, while serving northern states, have little overlap in their service areas, which could reduce Federal Trade Commission approval issues.
The FTC recently objected to several agreements reached by hospital systems in overlapping areas, prompting the organizations to halt their merger plans. President Biden’s administration has ordered regulators to apply greater scrutiny to hospital mergers to avoid higher costs to consumers and reduced services.
The COVID-19 pandemic appears to have slowed the pace of hospital consolidations, analysts said. Many systems have been concerned about handling the pandemic, as well as labor shortages and supply chain issues.
In the third quarter of 2022, only 10 hospital transactions were announced, according to Kaufman Hall, a consulting firm that works with healthcare organizations. There were only 25 deals announced in the first half of the year. Although there were fewer transactions, transactions were larger, including the proposed merger of Atrium Health and Advocate Aurora Health.
Two agreements on the health system have just been announced last week.
LCMC Health has reached an agreement to purchase three New Orleans area hospitals from HCA Healthcare. Yale New Haven Health System plans to purchase two Connecticut health systems, including three hospitals, from Prospect Medical Holdings.