Marshfield Clinic Health System and Essentia Health have signed an integration agreement, putting them one step closer to merging, the nonprofit health systems announced Thursday.
The combined company would comprise 25 hospitals in Michigan, Minnesota, North Dakota and Wisconsin, a health plan and roughly $6 billion in annual revenue. Marshfield of Wisconsin and Duluth, Minnesota-based Essentia signed a memorandum of understanding in October and expect the deal to close by the end of the year, pending regulatory approval.
“We are both physician-led organizations with an unwavering commitment to the health of rural communities,” Essentia Health CEO Dr. David Herman said in a news release.
Herman would be CEO of the combined organization, which would operate under a new parent company. Marshfield CEO Dr. Susan Turney said prior to the merger announcement that she would step down as CEO this fall.
The proposed Essentia-Marshfield merger represents the latest transaction in an active Midwestern acute-care market.
One of Marshfield’s main competitors, 17-hospital Aspirus Health of Wausau, Wisconsin, signed a letter of intent this month to combine with St. Luke’s Duluth, a two-hospital system in Minnesota. Milwaukee-based Froedtert Health and Neenah, Wisconsin-based ThedaCare signed a letter of intent to merge in April. In November, Gundersen Health System and Bellin Health, both based in Green Bay, Wisconsin, merged to form an 11-hospital system. Sioux Falls, South Dakota-based Sanford Health and Minneapolis-based Fairview Health Services are also pursuing a merger.
Marshfield recorded a $367.9 million operating loss in 2022 on $2.94 billion of operating revenue, according to an unaudited financial statement for the period ended Dec. 31. The health system reported a $60.2 million operating loss in 2021 on $2.8 billion of revenue.
Essentia generated $79.5 million of operating income in 2022 on $2.62 billion of operating revenue, according to an audited financial statement for the period ended June 30. The health system reported $168.3 million of operating income in 2021 on $2.45 billion of operating revenue.
While Essentia reported an operating gain, two of its hospitals are at risk of losing their 340B drug discount program status because some patients are poised to lose Medicaid during eligibility redeterminations, which would dent revenues.