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Baylor, Scott & White merger creates $8.3 billion system in Texas

Baylor Health Care System and Scott & White Healthcare closed on a deal to create Texas' largest not-for-profit health system.

The system has $8.3 billion in assets, based on unaudited 2013 figures, and 43 hospitals, including joint ventures. The combined operations will span 24 counties from the northern suburbs of Dallas to Brenham, Texas; roughly 240 miles south. Scott & White acquired a hospital in Brenham in 2010.

The giant system also includes a health plan with 225,000 members, an outpatient imaging joint venture, and more than 2,100 employed doctors and allied health professionals.

The deal underscores the consolidation underway in healthcare as hospitals, physicians and insurance companies race to prepare for changes in healthcare policy that will expand coverage to millions in coming months and will encourage alternative payment and delivery models such as accountable care and bundled payments.

Joel Allison, CEO of the newly created Baylor Scott & White Health, and Dr. Robert Pryor, the president, chief operating officer and chief medical officer for the system, were unavailable for comment at deadline.

Allison was formerly Baylor Health Care's president and CEO. Pryor was previously president and CEO of Scott & White Healthcare.

The deal, first announced in December 2012, figured into Scott & White Healthcare's growth strategy as a response to changes in healthcare policy.

“Healthcare has been a fragmented industry but is beginning to undergo rapid consolidation in the face of reform,” Scott & White told potential bondholders in documents this year. “Consolidation and growth is motivated by a number of factors, including economics of scale to reduce cost, access to capital, access to covered lives to control risk in population health management and to maintain industry influence.”

Growing organically won't be enough, Scott & White said at that time. “Mergers with carefully selected partners with aligned missions will be required if we are to achieve the scale necessary to compete in the future.”

The new organization's combined revenue, based on last year's figures, will total $5.9 billion. Baylor Health Care ended last year with $305 million in operating income on revenue of $3.83 billion in revenue. Scott & White finished 2012 with operating income of $65 million on revenue of $2.05 billion.

Follow Melanie Evans on Twitter: @MHmevans

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