As Froedtert Health and ThedaCare inch closer to completing a merger that would create an 18-hospital chain in Wisconsin, their top leaders say the deal would enable the new health system to better weather a tough labor market.
Froedtert Health of Milwaukee and Neenah-based ThedaCare, both nonprofits, sealed a definitive agreement last week to combine their companies next year after inking a letter of intent in April.
Related: Froedtert Health, ThedaCare sign definitive merger agreement
Froedtert Health President and CEO Cathy Jacobson, in line to be chief executive after the merger until her planned retirement next summer, and ThedaCare President and CEO Dr. Imran Andrabi, who would be president of the new entity at first and assume the CEO role after Jacobson's departure, spoke with Modern Healthcare to make the case that the deal would result in a stronger company and a better healthcare provider. The interview has been edited for length and clarity.
The Midwest hospital merger and acquisition market has been quite active over the last year. What makes this region so attractive for deal-making?
Jacobson: If you look at the industry writ large, we need to transform. I think that across the country, you're seeing people try different things to change healthcare, whether it's from a position of strength—like I believe we're doing—or from a position of necessity. We found our way, on our own timing, and we did our arrangement.
Andrabi: There are life cycles of systems, and there are systems that wait too long before they decide to do certain things. We both have made a proactive decision to do something when we are both strong. This is going to be a unique way of doing things and thinking about a proactive approach to value creation.
How will this combination mutually benefit Froedtert and ThedaCare?
Jacobson: This is a big enough combination that this is going to transform both organizations. It provides us a different platform to bring together our complementary strengths and creates a system of care that can extend from rural healthcare, which ThedaCare excels at, to urban areas like Milwaukee, which Froedtert serves today.
Andrabi: When we started this conversation, this was always about: How do we create value for our communities as we come together? The combination creates a new organization that's neither just ThedaCare nor just Froedtert. It's about making sure that we have that entire continuum in a singular health system, and then also improving the total cost of care over time.
How will this deal improve patient care?
Jacobson: The flow of the patients can be thought through in a more strategic way. From a Froedtert perspective, we have regions as far north as below Green Bay and all the way down to the state line [bordering Illinois]. There's an ability to better align our geography, and we have a huge opportunity to do that because we are regionally adjacent. We're not overlapping each other, so no one's closing clinics or hospitals.
How will this deal improve staff recruitment and retention?
Andrabi: In this day and age when we are all struggling for talent and struggling to make sure that we get the right people in the right spots, I hope this would elevate us in a unique way to be able to attract and retain talent.
By virtue of developing this new organization, we have the ability to attract talent not only within Wisconsin but also across state lines. We hope that is going to be something that's attractive to people when opportunities show up, both from a leadership perspective and from a team member perspective.
ThedaCare has been partnering with the Medical College [of Wisconsin] to develop residency training programs in the Appleton-Neenah area. That’s going to be coming to fruition and that began way before this conversation started. Also, both Froedtert and ThedaCare are embedded in the other educational systems within our communities, whether it's Marquette University, the University of Wisconsin-Oshkosh or a technical college. That's another way of creating a pipeline of people who are going to be serving these communities for a long time to come.
Are new jobs or layoffs expected as part of this transaction?
Jacobson: This deal is about serving the people of Wisconsin and meeting their needs. We didn't go into this deal to add or reduce jobs. Change could happen on either side, but there are no plans on either end of that.
What does this deal mean for Froedtert’s partnership with the Medical College of Wisconsin?
Jacobson: It builds on everything we've done over the last decades that we've been together. We're uniquely positioned right now to be able to expand the scale of MCW and what they bring to the table across the entire state, which has always been one of our aspirations.
Everything that MCW provides at Froedtert Health today—including specialty care, clinical trials, research, education—we expect them to be our partner in expanding that across the new organization, as well.
Do you have intentions of expanding the new system's footprint further throughout Wisconsin or into other states?
Andrabi: Our thinking is not, "Let's grow for the sake of growing," or "Let's jump over this geography or that geography." If the right opportunities, like the one we are talking about today, present themselves for the right reasons, then we'll evaluate them at that time.
Jacobson: Success breeds growth, and both Froedtert and ThedaCare have grown because of what we offer our communities and the demand for our services in our respective markets. If we create something that other health systems find unique and they want that approach, I think the right partners could come forward. But we're not going to do it just to grow.
There have been many recent deals and partnerships inked between healthcare organizations. Where do you see the sector going?
Jacobson: The industry is under immense stress. I've been in the industry for almost 40 years, and this is at least the second-worst environment I've seen. People have to make changes.
Sometimes they do that from a position of strategic strength, like we've done, but you're seeing all sorts of different formations out there right now. As one of our board members says, everybody has their own strategic thesis right now and is trying a bunch of stuff. That's why you're seeing these consolidations take so many different forms. I don't know where we're going to end up.
Also, just because people are coming together today doesn't mean there’s permanent cement glue there. Systems come together and come apart depending on the market forces, and I think you're going to see a realignment over time.
Andrabi: I think this will continue for a while. Stress will create different reasons for people to think, "Is there a different way or a better way?"
The purpose of deals and holding ourselves accountable to the communities we serve is going to be extremely important. Hopefully, what we are trying to do between Froedtert and ThedaCare could be a beacon of how it could be done.
