Larger IDNs with a national footprint could give greater control to provider organizations as payers also increase their acquisition plans

The first two weeks of December 2017 ushered in a string of potential mergers of integrated delivery networks (IDN) that, should they go through, stand to change the national competitive landscape in ways reminiscent of the mergers of Tenet and Vanguard, Community Health Systems and HMA, and HCA and IASIS in 2013 and 2014. Last week, Downers Grove, Illinois-based Advocate Health Care and Milwaukee, Wisconsin-based Aurora Health Care announced plans to merge, as did multistate Catholic Health Initiatives and San Francisco-based Dignity Health. This week, news broke about a possible merger between Ascension, the nation’s largest Catholic hospital system, and Seattle-based Providence St. Joseph Health.

The recent deals seem to be about strategic growth in specific markets. Advocate, Ascension, and CHI appear to be looking beyond their current markets to create a larger IDN footprint, selecting regionally dominant IDNs with similar values and beliefs.

The combination of these systems would create mega-IDNs with far-greater power and national impact. Chief among them would be the Ascension-Providence St. Joseph IDN, spanning more than 25 states and giving Ascension a greater presence on the West Coast. The combined Ascension-Providence St. Joseph would become the nation’s largest IDN in terms of hospitals and beds, based on DRG analysis of data from the Centers for Medicare and Medicaid Services. For inpatient discharges, Ascension-Providence St. Joseph would still trail HCA, but the gap would be considerably smaller.

Like Ascension, CHI would gain a larger presence on the west coast by merging with Dignity Health, adding Arizona, California, and Nevada to its 17-state service area. The CHI-Dignity Health merger would be among the top five IDNs in terms of hospital beds. The combined IDN would become the third-largest based on hospital discharges, behind HCA and the potential Ascension-Providence IDN. Excluding the Ascension-Providence merger, the combination of CHI and Dignity would become the second-largest IDN based on inpatient discharges.

Though the combined Advocate-Aurora IDN would still only be a regional player, it could significantly remake the Illinois and Wisconsin markets. Both organizations are currently the largest IDNs in their respective markets and states. The 93 miles between Milwaukee and Chicago could present growth opportunities for the combined system, bridging together the two separate markets. It will be interesting to see how the proposed “dual CEOs” works, given this arrangement is unique to this deal.

These potential merges will be subject to federal and state regulatory reviews, but there is minimal to no overlap among their respective service areas. Even if the rumored talks between Ascension and Providence St. Joseph prove unfounded, the CHI-Dignity and Advocate-Aurora deals, coupled with the recently announced Optum-DaVita and CVS-Aetna deals, would still have a major impact on the healthcare industry. We could be entering a new phase of IDN development in which more IDNs transition from regional ecosystems to a handful of national mega-IDNs.

For more information on M&A activity, follow Sarah on Twitter @SarahWilsonDRG.


A Look Ahead: Medical Aesthetics Market Recovery in 2021 and Beyond

View Now