West Georgia Health, a single-hospital system in LaGrange, has signed a letter of intent to join WellStar Health System, the state's largest not-for-profit community health system.
No money would be exchanged in the deal, in which Marietta-based WellStar would assume ownership of West Georgia's obligations from its municipal hospital authority, pending regulatory approval. Officials from both systems said the changing industry has made it challenging for smaller systems to survive.
“As the revenue side changes from fee-for-service to value-based payment, you have to have economies of scale,” WellStar CEO Reynold Jennings said. “You need to be in a tight geographic area.”
The deal comes as WellStar makes plans with Atlanta's Emory University to create a merged organization that would operate close to a dozen hospitals. WellStar currently offers health plans in partnership with Piedmont Healthcare in Atlanta.
Given its size and location in northwest Georgia, Jennings said WellStar, a five-hospital system, determined it was well-suited to take on West Georgia Health's operations. WellStar already has collaborations with other hospitals in the region, although the two systems' markets don't overlap.
West Georgia has more post-acute-care assets than most hospitals its size, including a home health unit, two nursing homes and hospice care, which made it an attractive partner, Jennings said. Moving forward, WellStar plans to consider improvements in its outpatient surgery and physical therapy offerings.
The letter of intent with West Georgia Health voiced strong support for retaining the system's current management team, though final decisions will be made as the merger moves forward. WellStar will conduct a branding study to decide whether to retain the West Georgia name.
West Georgia Health's finances are sound, said its President and CEO Jerry Fulks, but the system isn't big enough to handle the risk exposure that comes with value-based care, particularly since commercial insurance accounts for only 25% of its payer mix, and 12% of care provision is indigent care.
“We wanted a cultural fit,” Fulks said. “WellStar withstood the test of time in terms of all of the discussions we've had. We think they make a very good fit on shared culture and the same set of values.”
Though hospital mergers recently have met with regulatory pushback across the country, both Fulks and Reynolds said they don't expect any major problems. “We would not embark on a path if we had any warning signals in that regard,” Reynolds said.