Ochsner Health System and Lafayette General Health announced Wednesday that they plan to merge, a deal the health systems' leaders said is in the best interest of their region and the state of Louisiana.
The resulting system would have 33 hospitals and 139 clinic locations across southern Louisiana. Leaders expect the deal to close in spring 2020, pending due diligence and regulatory approvals.
Lafayette, La.-based Lafayette General has fallen on shaky footing in recent years, posting a slim, 1.4% operating margin in its fiscal 2018. Last year, it narrowly avoided shuttering its graduate medical education facility, University Hospital & Clinics, which jeopardized 800 jobs and healthcare services for vulnerable patients.
A deal like this will provide UHC greater stability, said Lafayette General's president, David Callecod. He insisted Lafayette General comes to the union from a position of strength, saying the health system will finish 2019 with the best margin it has had in years.
"We know that we need the resources and we need the scale of a partner in order for us to be successful," he said. "This deal allows us and will provide us an opportunity to invest capital in a number of our key service lines in order to grow those service lines and increase the number of specialists we have."
Ochsner CEO Warner Thomas said teaming up will help the systems compete with disruptors, such as the newly announced Amazon Care.
"I think this is really strong organizations coming together to realty position very differently and better for the future," he said.
Lafayette General and Jefferson, La.-based Ochsner have had a clinical affiliation since 2015.
As part of the deal, Ochsner has pledged to invest $365 million in capital and resources in Acadiana over the coming decade. Acadiana is a 10-parish south-central region of Louisiana that includes Lafayette.
The resulting system would invest more than $50 million in expanding key services, including pediatrics, women's health, cancer services and more, as well as pioneering desperately needed behavioral health services, the systems said in a press release.
The deal needs regulatory approval from Louisiana's attorney general and the Federal Trade Commission. Callecod said he does not anticipate any issues.
Post-merger, Lafayette General will retain its name, although the two systems will work on a co-branding strategy, Callecod said.
Lafayette General will not cut any employees under the deal, and minimum pay will increase by $2 to $12 per hour system-wide, the system said. Callecod added employees' benefits and retirement pay won't change either.
"Quite frankly this is not just preserving jobs, but we believe this is going to grow our employee base," he said.