Duluth, Minn.-based Essentia Health and Marshfield (Wis.) Clinic Health System have ended efforts to combine into a 25-hospital regional health system.
The systems announced the conclusion of a merger pursuit Jan. 5, more than a year after they began merger talks and five months after they signed an integration agreement. Essentia and Marshfield Clinic shared a timeline to formally combine by the end of 2023 pending regulatory approval.
The Midwestern health systems "have chosen not to move forward with their proposed integration," according to their joint news release shared with Becker's. "We have decided that a combination at this time is not the right path forward for our respective organizations, colleagues and patients."
Asked whether Marshfield's financial situation drove this decision, a spokesperson for Essentia said it was the primary factor. Marshfield recorded an operating margin of -5.4% in early 2023 and in November 2023, it moved to cut employee pay and benefits, including suspension of 401(k) employer match and employee retirement plans, including for executives.
Essentia just barely broke even in fiscal 2023.
"Financial stability is a critical component of Essentia being able to fulfill our mission for our patients and communities," the Essentia spokesperson said. "We appreciate the incredible contributions of our colleagues, whose hard work ensures we are a growing organization that provides excellent, accessible care to our communities." Regulatory reviews did not affect the outcome, according to the spokesperson.
Combined, Essentia and Marshfield Clinic would have shared a presence in Wisconsin, Minnesota, Michigan and North Dakota with 3,800 providers and 150 sites of care, including 25 hospitals. Fourteen of those hospitals would have come from Essentia and 11 from Marshfield Clinic. Essentia CEO David Herman, MD, was set to serve as the chief executive of the combined organization.
"As we've explored this opportunity, I appreciate the relationships we've built with the skilled Marshfield Clinic providers, staff and leaders who share our dedication to excellent care," Dr. Herman said in the release.
Marshfield Clinic saw a change in leadership throughout the merger pursuit. Susan Turney, MD, the first CEO of Marshfield (Wis.) Clinic Health System, stepped down in September 2023 after nine years in the role. Brian Hoerneman, MD, is leading the system now as interim CEO.
"Essentia Health and the Marshfield Clinic Health System are high-performing, well-respected, community-focused organizations. Those similarities served as the basis for efforts toward a combination. As we now move our separate ways, Marshfield Clinic looks forward to advancing our 100-year legacy of providing compassionate and accessible care to the communities we serve," Dr. Hoerneman said in the release.