Jefferson and Lehigh Valley Health Network plan to merge next year, creating a system of 30 hospitals and more than 700 care sites in Pennsylvania and New Jersey.
The two health systems said Tuesday they signed a non-binding letter of intent to merge and plan to sign a definitive agreement and close the transaction sometime in 2024, pending regulatory approval.
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If approved, the systems said the combined system could bolster the academic programs and clinical research at Thomas Jefferson University's Sidney Kimmel Medical College and Jefferson College of Nursing, strengthen Jefferson Health Plans and improve the financial stability of the two systems.
“We'll be looking to knit the system together, take advantage of the great clinical programs that Lehigh Valley has, together with the great programs that Jefferson has,” Jefferson CEO Dr. Joseph Cacchione said. “We feel like we could create destinations within the system.”
Lehigh Valley President and CEO Brian Nester said Jefferson Health Plans was a big driver behind the discussions that began about six months ago. Lehigh had for years sought to incorporate health plan options into its business.
“We didn't want to do it on our own. It takes too much risk-based capital,” Nester said. “We were … population health-oriented, but we needed that [health plan], and we wanted the first premium dollar. We didn't want 88 cents after some other intermediary took 12% off the top.”
Cacchione said the agreement would give Jefferson more capacity to hire employees. No layoffs are planned at this time, he said.
Cacchione said he expects the transaction to close in 2024's second or third quarter.
Thomas Jefferson University, whose health network operates 17 hospitals and more 50 outpatient and urgent care locations, has made seven big acquisitions since 2015. It reported a $186.6 million net loss in the first quarter of its fiscal 2024 ended Sept. 30.
Earlier this year, Jefferson consolidated its five divisions into three to streamline operations.
Lehigh operates 13 hospital campuses, 29 health centers and more than 300 primary and specialty practices. It reported a $66.1 million net loss in its fiscal 2024 first quarter ended Sept. 30.
“This is not a deal that we have to do. This is a deal we really want to do,” Nester said. “This is an elective, proactive move. … We'll be able to make big bets and big investments that neither of us alone necessarily would have been able to make.”
Upon closing, Cacchione would be CEO of the combined system. Nester would serve as chief operating officer and president of the legacy Lehigh network. Jefferson Health President Dr. Baligh Yehia would serve as chief transformation officer and president of the legacy Jefferson operations. The new board and leadership team would include members from both systems.
