This week, Detroit-based Henry Ford Health System and Royal Oak, Mich.-based Beaumont Health System called off their merger, which would have resulted in a $6.4 billion, 10-hospital system across the state. As more hospitals pursue mergers, the number of deals called off may also inherently grow. Below are six hospital deals that, at some point in their lifetime, were called off.
Some ended up making it off the ground — like the deal between Highmark and West Penn Allegheny Health System in Pittsburgh, which was called off but then resumed months later — whereas most do not. From antitrust concerns to the medical directives of the Catholic doctrine to physician opposition, the following deals all fell through for a range of reasons. Here they are, dating back to April 2012, beginning with the most recently called off merger.
1. Beaumont, Henry Ford Call Off Merger
This week, after more than six months of negotiations, officials from Detroit-based Henry Ford Health System and Royal Oak, Mich.-based Beaumont Health System put an end to their merger talks. HFHS CEO Nancy Schlichting said two "very different perspectives" had emerged for a merged organization. Consequently, many foundational elements laid out in the letter of intent, including the preservation of two academic medical centers in Detroit and Royal Oak, were no longer supported by some leaders at Beaumont, Ms. Schlichting said.
Beaumont President and CEO Gene Michalski said the systems were not aligned due to differences in structures and business models. There were also reports of opposition to the merger from physicians and clinical heads at Beaumont.
2. Sanford Health Calls Off Fairview Merger
Last month, Fargo, N.D.-based Sanford Health withdrew from merger discussions with Minneapolis-based Fairview Health Services. Sanford CEO Kelby Krabbenhoft said his system's initial merger talks turned into a situation that found Sanford unwelcome by some interested parties and key stakeholders of Fairview.
Minnesota Attorney General Loris Swanson had held public hearings on the proposed merger. Ms. Swanson had expressed concern that Fairview and Sanford did not involve any public officials before their initial merger discussions. Mr. Krabbenhoft said Sanford will only reconsider the merger "if Fairview and the University of Minnesota have sufficiently resolved issues within their relationship and secured a positive understanding by Attorney General Swanson of their intentions and plans."
3. Waterbury Hospital, St. Mary's Hospital in Connecticut Call Off Merger
In October 2012, officials from Waterbury (Conn.) Hospital called off the pending merger with St. Mary's Hospital, also in Waterbury. The two entities had negotiated a deal for more than a year. Officials decided to forego merger plans due to difficulties resolving women's healthcare services with ethical and religious directives of the Catholic Church, according to the report. Although Waterbury Hospital officials had approved the merger in April, the hospitals found it challenging to reach an agreement over birth control and other reproductive procedures.
However, earlier this month, Waterbury Hospital and Nashville, Tenn.-based Vanguard Health Systems ratified a deal that will create a joint venture between the two systems.
4. West Penn Allegheny Calls Off Highmark Merger
In September 2012, Pittsburgh-based West Penn Allegheny Health System canceled its merger with health insurer Highmark, claiming the payor breached the affiliation agreement. Highmark allegedly wanted to restructure the health system through bankruptcy, which violated the companies' affiliation agreement. The divorce didn't last long, however. Leaders from both organizations returned to the table to rejuvenate the plan in November, as West Penn leaders determined Highmark remained the "best-suited partner" despite the break-up.
In January, Highmark salvaged its merger proposal when it agreed to purchase West Penn's debt at a discounted rate, avoiding a bankruptcy filing. Highmark said it would buy West Penn's more than $700 million in bonds at 87.5 cents on the dollar. Combined with other ancillary costs associated with the transaction, that deal may ultimately cost Highmark more than $1.6 billion, which is more than three times its original purchase price of $475 million. The deal was finalized in late April when the Pennsylvania Insurance Department approved the affiliation. West Penn is now the flagship of the new system, called Allegheny Health Network.
5. Abington Health, Holy Redeemer Health Call Off Merger
Last July, Abington (Pa.) Health and Huntingdon Valley, Pa.-based Holy Redeemer Health System decided to end discussions regarding a potential partnership to create a larger health system. The organizations released a joint statement saying although they were disappointed, they believed ending merger plans was the right decision and in their best interests.
The organizations had announced their merger discussions in June, but physicians at Abington Memorial Hospital, the flagship hospital of Abington Health, voiced strong opposition to the deal. They were concerned with potential changes, such as what women's health services Abington could provide to comply with Holy Redeemer's Catholic doctrine.
6. OSF Healthcare, Rockford Health Cancel Merger
Last April, OSF Healthcare in Peoria, Ill., and Rockford (Ill.) Health canceled plans to merge, with "great reluctance." They cited the preliminary injunction granted to halt the deal and the prospect of a two-year legal battle with the Federal Trade Commission as deterrents to pursuing the merger.
The FTC challenged the merger, claiming the reduction in competition in the Rockford area would lead to higher costs. The same month the merger was called off, a U.S. district judge had granted the FTC's request for a temporary injunction, pending an administrative trial in Washington, D.C. Both organizations said they would instead explore other options to bring more efficient, cost-effective and quality care to the Rockford community.
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Some ended up making it off the ground — like the deal between Highmark and West Penn Allegheny Health System in Pittsburgh, which was called off but then resumed months later — whereas most do not. From antitrust concerns to the medical directives of the Catholic doctrine to physician opposition, the following deals all fell through for a range of reasons. Here they are, dating back to April 2012, beginning with the most recently called off merger.
1. Beaumont, Henry Ford Call Off Merger
This week, after more than six months of negotiations, officials from Detroit-based Henry Ford Health System and Royal Oak, Mich.-based Beaumont Health System put an end to their merger talks. HFHS CEO Nancy Schlichting said two "very different perspectives" had emerged for a merged organization. Consequently, many foundational elements laid out in the letter of intent, including the preservation of two academic medical centers in Detroit and Royal Oak, were no longer supported by some leaders at Beaumont, Ms. Schlichting said.
Beaumont President and CEO Gene Michalski said the systems were not aligned due to differences in structures and business models. There were also reports of opposition to the merger from physicians and clinical heads at Beaumont.
2. Sanford Health Calls Off Fairview Merger
Last month, Fargo, N.D.-based Sanford Health withdrew from merger discussions with Minneapolis-based Fairview Health Services. Sanford CEO Kelby Krabbenhoft said his system's initial merger talks turned into a situation that found Sanford unwelcome by some interested parties and key stakeholders of Fairview.
Minnesota Attorney General Loris Swanson had held public hearings on the proposed merger. Ms. Swanson had expressed concern that Fairview and Sanford did not involve any public officials before their initial merger discussions. Mr. Krabbenhoft said Sanford will only reconsider the merger "if Fairview and the University of Minnesota have sufficiently resolved issues within their relationship and secured a positive understanding by Attorney General Swanson of their intentions and plans."
3. Waterbury Hospital, St. Mary's Hospital in Connecticut Call Off Merger
In October 2012, officials from Waterbury (Conn.) Hospital called off the pending merger with St. Mary's Hospital, also in Waterbury. The two entities had negotiated a deal for more than a year. Officials decided to forego merger plans due to difficulties resolving women's healthcare services with ethical and religious directives of the Catholic Church, according to the report. Although Waterbury Hospital officials had approved the merger in April, the hospitals found it challenging to reach an agreement over birth control and other reproductive procedures.
However, earlier this month, Waterbury Hospital and Nashville, Tenn.-based Vanguard Health Systems ratified a deal that will create a joint venture between the two systems.
4. West Penn Allegheny Calls Off Highmark Merger
In September 2012, Pittsburgh-based West Penn Allegheny Health System canceled its merger with health insurer Highmark, claiming the payor breached the affiliation agreement. Highmark allegedly wanted to restructure the health system through bankruptcy, which violated the companies' affiliation agreement. The divorce didn't last long, however. Leaders from both organizations returned to the table to rejuvenate the plan in November, as West Penn leaders determined Highmark remained the "best-suited partner" despite the break-up.
In January, Highmark salvaged its merger proposal when it agreed to purchase West Penn's debt at a discounted rate, avoiding a bankruptcy filing. Highmark said it would buy West Penn's more than $700 million in bonds at 87.5 cents on the dollar. Combined with other ancillary costs associated with the transaction, that deal may ultimately cost Highmark more than $1.6 billion, which is more than three times its original purchase price of $475 million. The deal was finalized in late April when the Pennsylvania Insurance Department approved the affiliation. West Penn is now the flagship of the new system, called Allegheny Health Network.
5. Abington Health, Holy Redeemer Health Call Off Merger
Last July, Abington (Pa.) Health and Huntingdon Valley, Pa.-based Holy Redeemer Health System decided to end discussions regarding a potential partnership to create a larger health system. The organizations released a joint statement saying although they were disappointed, they believed ending merger plans was the right decision and in their best interests.
The organizations had announced their merger discussions in June, but physicians at Abington Memorial Hospital, the flagship hospital of Abington Health, voiced strong opposition to the deal. They were concerned with potential changes, such as what women's health services Abington could provide to comply with Holy Redeemer's Catholic doctrine.
6. OSF Healthcare, Rockford Health Cancel Merger
Last April, OSF Healthcare in Peoria, Ill., and Rockford (Ill.) Health canceled plans to merge, with "great reluctance." They cited the preliminary injunction granted to halt the deal and the prospect of a two-year legal battle with the Federal Trade Commission as deterrents to pursuing the merger.
The FTC challenged the merger, claiming the reduction in competition in the Rockford area would lead to higher costs. The same month the merger was called off, a U.S. district judge had granted the FTC's request for a temporary injunction, pending an administrative trial in Washington, D.C. Both organizations said they would instead explore other options to bring more efficient, cost-effective and quality care to the Rockford community.
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