A merger between three health systems in the greater Detroit region—Beaumont Health System
, Botsford Health Care and Oakwood Healthcare—has closed, creating a $3.8 billion not-for-profit health system now called Beaumont Health.
The new system already has identified $100 million in cost-savings opportunities that focus on using the combined organization's purchasing power to negotiate better prices and streamline what executives are calling backroom operations. No layoffs are planned at this time.
“We are very confident there will be significant cost savings coming out of this organization,” said Gene Michalski, Beaumont Health's CEO, said during a call Wednesday.
The move from fee-for-service to value-based healthcare is one of the main drivers of the merger, he said. That shift is driving hospitals to reduce costs and larger health systems, such as the new Beaumont, can often demand lower prices on medical devices, supplies and purchased services than individual or smaller hospital systems.
The deal received regulatory approval
from state and federal officials in recent weeks after a definitive agreement was reached in June. The three health systems had announced plans to merge in March
, spurred on by sweeping payment changes underway as a result of the implementation of the Patient Protection and Affordable Care Act.
A new executive team, including the roles of chief financial officer and chief medical officer, will be announced this year.
The combined hospital systems generated more than 168,000 inpatient admissions and 492,677 emergency visits in 2013 and will make up about 30% of the Detroit market.
Beaumont Health System, a three-hospital system based in Royal Oak, Mich., previously attempted to merge with Henry Ford Health System, a five-hospital system based in Detroit. The proposed deal failed
after six months of negotiations.
Botsford Health Care is a 306-bed hospital in Farmington Hills, Mich. Oakwood owns four hospitals and is based in Dearborn, Mich. Follow Jaimy Lee on Twitter: @MHjlee