Intermountain Healthcare and SCL Health have officially joined forces, the not-for-profit health systems said Tuesday.
The estimated $14 billion combined organization operates 33 hospitals, 385 clinics and a 1-million-member health plan staffed by around 59,000 employees across seven states. The Colorado Attorney General's Office signed off on the merger last week.
"SCL Health approached us in the wake of Sanford merger. The nicest thing that came out of that was that SCL knew we were in the market to grow," Intermountain CEO Dr. Marc Harrison said in an interview."They are an organization that has been approached again and again and were never interested, but they wanted to join us because of our quality footprint, our commitment to digital innovation and value, and the benefits of having a health plan in the toolbox."
There are "sufficient safeguards" in the merger agreement that will preserve the same level of access to healthcare services throughout Colorado and maintain SCL's charitable mission, according to the attorney general's review.
Both organizations agreed there will be "no material layoffs or downsizing" nor clinical facility consolidation. Attorney General Phil Weiser recused himself due to a potential conflict of interest, which was not disclosed.
"Both organizations are very careful with headcount and run very lean and efficiently," said Harrison, who will lead the combined system. "Some will choose to leave, but we do not wish to lose any talent."
Salt Lake City-based Intermountain is the parent company of the combined system, governed by a 16-person board—12 members from Intermountain and four from SCL, which is based in Broomfield, Colorado. Autonomous regional executive teams will "maintain primary oversight" of their respective operations and feed into the centralized board, according to merger documents reviewed by the attorney general.
Intermountain will phase in its brand to SCL facilities. SCL's Catholic entities, including Saint Joseph Hospital and St. Mary's Medical Center, will maintain their affiliation with the Catholic Church. Intermountain will remain secular.
As for the health plan SelectHealth, the combined system does not seek to disrupt current payer relations, Harrison said. "We will look at the footprints to understand market by market if SelectHealth plays, and if it plays at all," he said.
Intermountain can continue to scale up its telehealth network across its broader footprint, Harrison said. It uses the technology to extend its specialists' skills into smaller community hospitals and rural locations that have trouble recruiting doctors.
"We believe the future is a hybrid health system that is clicks and mortar," Harrison said. "There will always be a need to take care of people in the hospital and emergency department, but this gives us the opportunity to scale our digital ecosystem across the system."
The organizations operate on different electronic health records platforms, with Intermountain on Cerner and SCL on Epic. There is no plan in the short term to move to a single EHR because there is no clinical or geographic overlap, Harrison said.
Cost savings are typically harder to glean from far-flung organizations with minimal geographic overlap, research shows. Executives claim that bundling purchases across a bigger organization will help them save on vendor contracts, for instance.
But hospital mergers only saved acquired hospitals $176,000 on supply chain expenses, or 1.5% annually on average, according to a 2018 working paper that analyzed 81 transactions from 2009 to 2014. Those savings primarily occurred in mergers involving hospitals in close proximity, researchers from the Wharton School of the University of Pennsylvania found.
Both systems have been financially stable. Intermountain reported $558 million in operating income on revenue of $8.7 billion in 2021, up from $378 million in operating income on $7.8 billion of revenue in 2020. The health system received $220 million in COVID-19 relief grants.
SCL reported $8.4 million in operating income on operating revenue of $2.33 billion through the nine months ended Sept. 30, the most recent data available. That was down from $63.8 million in operating income on $2.11 billion of operating revenue in the same prior-year period. SCL recognized $46 million in COVID-19 relief grants over the most recent reporting period and had an accelerated depreciation and impairment charge of $115.4 million.
Both systems benefited from investment gains, with Intermountain reporting $1.39 billion of related income in 2021 and SCL reporting $185.6 million over the first nine months of its 2021 fiscal year.