Sentara Healthcare and Cone Health plan to merge in a deal that would create a 17-hospital system with more than 2,400 physicians and advanced practice clinicians.
The strategy behind combining into a $11.5 billion-revenue system is to improve value-based models, affordability and care, Sentara CEO and President Howard Kern and Cone Health CEO Terry Akin said in an interview with Becker's. They also emphasized an investment in technology.
"Both of us in our first conversations explored our motives very carefully. We asked: 'Why are we trying to do this?' If the answer is just to get big, both of us agreed that's not the reason to do it," Mr. Kern said. "We decided very, very quickly that we didn't want to be a mega-deal because it wouldn't facilitate value and achieve the kinds of merger efficiencies that haven't happened in other healthcare deals."
"There's no point in merging to merge," Mr. Akin said. "It will benefit our communities in terms of better healthcare quality and affordability. There's a strategic reason to pursue."
The combined system would be headquartered in Sentara's base of Norfolk, Va., and would be overseen by Mr. Kern. Mr. Akin would serve as president of the Cone Health division, which would maintain regional headquarters in Greensboro, N.C. The organizations would share governance at the corporate level. Mr. Kern said no layoffs are planned.
The health systems also operate health plans. Sentara runs Optima Health Plan and Virginia Premier Health Plan, which serve 858,000 members, while Cone Health runs a Medicare Advantage plan with 15,000 members. Mr. Akin said the health systems plan to eventually combine their health plan operations.
The deal, which is subject to regulatory approval, is expected to close in mid-2021. Mr. Kern and Mr. Akin said merger discussions began about a year ago, but slowed at some points due to the pandemic.
Of the proposed merger, Scott Becker, publisher of Becker's Healthcare, said, " A special congrats today to Sentara Healthcare and Cone Health. Two great systems coming together. A special note to Howard Kern. From the moment he took over as CEO, he has put a tremendous focus on quality and consumer experience. In his tenure, Sentara has doubled in size and gotten better and better. Congratulations."