Aspirus Health and St. Luke’s Duluth signed a definitive agreement, with plans for Aspirus to complete its acquisition of St. Luke's next spring.
In July, Wausau, Wisconsin-based Aspirus and St. Luke’s, a two-hospital system based in Minnesota, signed a letter of intent.
Aspirus would invest at least $300 million over eight years in St. Luke’s as part of the definitive agreement announced Monday. Also, Aspirus said it would expand its health plan to St. Luke’s service area within two years of closing.
Related: Aspirus Health seeking merger partners beyond St. Luke's Duluth
The boards of both health systems unanimously approved the terms of the definitive agreement.
Under the pact, the combination would not result in any job cuts at St. Luke's, according to a news release. The combined organization would comprise 19 hospitals, 130 outpatient locations, and nearly 14,000 employees, including 1,300 employed physicians and advanced practice clinicians. Its headquarters would be in Wausau, Wisconsin, and the system would maintain a corporate office in Duluth.
Matt Heywood, president and CEO of the 17-hospital Aspirus, told Modern Healthcare in August that the combination would provide some backup for tertiary care, allowing the organizations to transfer acute patients based on capacity and demand. Ultimately, the health systems would be able to keep more care for patients in rural communities closer to home, he said.
Aspirus reported operating income of $37.4 million and revenue of $1.93 billion in 2023, compared with operating income of $47.1 million and revenue of $1.88 billion in 2022, according to its unaudited financial statement for the period ended June 30.
Through the first six months of St. Luke’s fiscal year, the health system recorded an operating loss of $7.3 million and revenue of $274.5 million, compared with an operating loss of $4 million and revenue of $265.3 million in the first half of 2022, according to its unaudited financial statement for the period ended June 30.
Earlier this month, Minnesota Attorney General Keith Ellison (D) said his office was investigating both the Aspirus-St. Luke’s deal and the proposed merger of Marshfield (Wisconsin) Clinic Health System and Duluth, Minnesota-based Essentia Health. Ellison has additional authority to challenge proposed mergers under a new state law.
State and federal regulatory reviews are next steps for Aspirus and St. Luke’s, including a community meeting on Oct. 25 with Ellison's office.
The Aspirus-St. Luke’s proposal represents one of more than a dozen Midwest health system merger proposals and completed transactions that have taken place in the past year. The Midwest acute-care market has been active, in part, because it tends to be more difficult for health systems to operate in rural areas and larger states, especially in terms of negotiations with insurance companies, merger and acquisition experts said.
