Virginia-based Sentara Healthcare and Cone Health, headquartered in Greensboro, North Carolina, have signed a letter of intent to merge.
This would create a health system that would bring in an estimated annual revenue of $11.5 billion, according to the Daily Press. There would be no cash involved in the transaction, with combined reserves and assets allowing the organizations to potentially spend more on new projects, the report said.
In making the announcement, Sentara and Cone touted their similarities as regional, community-based health systems with similar visions and cultures. The organizations’ stated mission is to unify into a “value-driven organization” that will be a model for the nation’s healthcare systems.
WHAT’S THE IMPACT?
Sentara Healthcare is an integrated, nonprofit system encompassing 12 hospitals in Virginia and northeastern North Carolina. It employs more than 1,200 physicians and advanced-practice clinicians, 30,000 team members and operates hundreds of sites of care. Sentara’s Optima Health Plan and Virginia Premier Health Plan serve 858,000 members in Virginia, North Carolina and Ohio.
Cone Health is a nonprofit, integrated network consisting of five hospitals in North Carolina. The system employs more than 13,000 people, including nearly 1,200 physicians and advanced-practice providers. It operates more than 100 care sites. Its Medicare Advantage health plan, HealthTeam Advantage, serves 15,000 members.
The systems said they are “strongly aligned,” and have a keen focus on expanding on their value-based care models, increasing their integrated health insurance options, building technology platforms to increase patient access points (both digitally and virtually), growing community impact to create meaningful change, and “ultimately tackling the toughest challenges in healthcare.”
A new name for the combined health system has yet to be decided upon, but headquarters would remain in Sentara’s home of Norfolk. Sentara CEO Howard Kern would head the new entity, while Cone CEO Terry Akin would remain in North Carolina and serve as president of the Cone Health division.
Neither company said they expect layoffs, though the combined organizations would look to save costs by reducing redundancies in duplicate back office roles, such as finance and IT services.
The Sentara Healthcare board of directors and Cone Health board of trustees have each approved the terms of the letter of intent. The combined organization is subject to state and federal regulatory review and customary closing conditions. The merger is anticipated to close in mid-2021. Following that, it is expected to take up to two years to fully combine and integrate.
THE LARGER TREND
Mergers like Sentara and Cone’s are becoming rarer as 2020 unfolds, with data from SOLIC Capital showing M&A activity slowed significantly in the second quarter, down 20% from Q1 and down 34% compared to Q2 2019.
The long-term care and physician medical group sectors were among the hardest hit, declining 40% and 50% in M&A transaction volume, respectively, compared to Q1 2020. Year-over-year, long-term care M&A transactions declined 50% compared with Q2 2019, while the figure for physician medical groups fell 63% over that same time frame.
ON THE RECORD
“This rapidly changing healthcare environment requires tremendous transformation and innovation to ensure the long-term success of each respective health system and, most importantly, the very best for those we are privileged to serve,” said Kern. “We can either react to change, or we can shape it. We are choosing to shape change and will lead this transformation of healthcare together.”
“In Sentara Healthcare, we’ve found a like-minded organization who shares our commitment to transforming healthcare,” said Akin. “The combined organization will build on our shared commitments and distinct expertise to promote better health outcomes and minimize healthcare costs for consumers. Our integration strengthens and accelerates our shared mission and strategy to transform healthcare in the communities we serve. We have long said we will not grow just for growth’s sake. We are joining forces to tackle the toughest challenges in healthcare.”