Baylor Health Care System, Dallas, and Scott & White Healthcare, Temple, Texas, signed an agreement of intent to merge—a move they characterized as designed to prepare their operations for the changes expected as a result of healthcare reform.

With the industry moving toward a greater focus on population health, officials for the two organizations decided that they could be better prepared as a single larger organization, said Joel Allison, president and CEO of Baylor Health. Allison would be CEO of the new company. "We realized the way in which care is going to be delivered is going to change," Allison said.

The two organizations would be governed by a single board with seven members coming from each of the two organizations and would be called Baylor Scott & White Health, according to a news release. The foundation for the two systems would remain separate and Baylor and Scott & White will be separate operating divisions, though they would be combined over time, according to the release.

The two systems already worked together on some projects, and combining seemed like a natural progression, said Dr. Robert Pryor, president and CEO of Scott & White and the planned president and COO of the new organization.

Baylor operates 11 hospitals, according to the American Hospital Association. The system had annual net revenue of $4 billion in the fiscal year ended June 30, according to Baylor. Physician-led Scott & White operates six hospitals and contract-manages one, according to the AHA. Scott and White had net revenue of $2.1 billion in the year ended Aug. 31.

A definitive agreement is expected to be signed in 2013.