Sentara, NC chain call off merger
Health care partnership was pending approval; North Carolina AG had been reviewing the deal
Sentara and a North Carolina hospital chain will not continue pursuing a merger that would have formed a combined health care system of $11.5 billion in annual revenue.
Sentara Healthcare and Cone Health, based in Greensboro, North Carolina, released a joint statement Wednesday afternoon announcing they did not plan to move forward with the proposal. They provided scant details on what led to the decision.
Pending state and federal regulatory approval, the deal, which would have expanded Sentara’s 12 hospitals to 17 and perhaps grown its roster of employees from some 30,000 to about 43,000, was expected to close this summer.
It’s not clear what prompted the about-face. Sentara officials didn’t immediately respond to questions on whether the regulatory review
“Bigger doesn’t always mean better. In fact, it often means worse and more expensive.”
— North Carolina Attorney General Josh Stein in a statement to The Virginian-Pilot on Wednesday
process had factored into the decision to call off the merger.
In a statement to The Virginian-Pilot on Wednesday, North Carolina Attorney General Josh Stein said a recent wave of hospital consolidations has given him “real concerns” about the trend. His agency had been investigating the proposed transaction.
“Bigger doesn’t always mean better. In fact, it often means worse and more expensive,” he said in an email. “My office takes its role in scrutinizing proposed combinations seriously, and we were in the midst of conducting a thorough review of the Cone/Sentara affiliation. I encourage all hospital directors to be certain that consolidation is actually in the interest of the patients and communities they serve before pursuing it.”
Stein said hospital system pricing is closely tied to the issue and believes consolidations tend to drive up health care costs. He sent a letter Wednesday to all hospital administrators in North Carolina, asking for their compliance with federal pricing transparency regulations.
“Patients have been forced to navigate the health care system with little, if any, information about the actual price of services they are told are necessary,” he said. “That’s not only unacceptable, it’s against the law.”
In a May 11 email to The Pilot, Charlotte Gomer, a spokeswoman for Virginia Attorney General Mark Herring, said the office would eventually take a look at the proposal under the Disposition of Assets by Nonprofit Health Care Entities statute, but was not sure when that would happen.
Several Freedom of Information Act requests over the past six months related to the hospital systems and the proposed transaction have returned no responsive records.
Gomer did not respond to an inquiry Wednesday regarding the status of its review.
Sentara and Cone had been working to bring the systems together for months. But the Sentara board of directors and Cone board of trustees came to the “mutual agreement” to end consolidation plans late last week.
“As this work progressed, we realized that each of our communities and key stakeholders require support and commitments from our respective organizations that are better served by remaining independent,” according to the statement. “The decision was a difficult one, but both organizations remain dedicated to advancing our common goal of providing outstanding care for our respective communities.”
The proposed merger, announced last August, would have set the stage for Sentara, the largest health care provider in Hampton Roads, to potentially open more outpatient facilities in Virginia and North Carolina as well as expand its digital and virtual-visit technology. Sentara already runs one hospital in North Carolina — Albemarle Medical Center in Elizabeth City.
One of the advantages for Cone would have been integrating health plans. Sentara’s insurance, Optima Health Plan and Virginia Premier Health Plan, is much larger, serving about 858,000 members in Virginia, North Carolina and Ohio; Cone’s Medicare Advantage plan serves about 15,000.
Unlike for-profit business acquisitions, cash would not have been involved in the transaction between the two nonprofit organizations, but combining reserves and assets would have allowed them to spend more on new projects, representatives from both health systems said last year.
Sentara would have headed the combined system, with corporate headquarters remaining in Norfolk and CEO Howard Kern at the helm. Cone’s CEO was expected to stay in Greensboro and serve as president of the Cone Health division.
“I am confident that this mutual decision will not alter either organization’s ongoing commitment to meet the needs of our respective communities,” Kern said in a statement. “Sentara and Cone Health remain aligned and in agreement that our first priority is to those we serve, and we believe this will be better done as independent organizations.”
It’s not known whether the Federal Trade Commission was in the midst of reviewing the potential consolidation of the two systems. The agency doesn’t confirm the existence of investigations or release details about them. The FTC has not filed any related complaints.
Hospital system mergers have been trending nationally for years. About 2,500 facilities have been involved in consolidations or takeovers in the past two decades.
Their owners say these deals allow for streamlining of resources to offer patients better care at lower costs because of increased volume, but many health care policy experts say mergers can do the opposite, leading to higher prices.