Advocate Aurora Health in merger, expansion talks
Move would push health system into Michigan
Advocate Aurora Health — already one of the country’s largest health systems — is in merger talks to expand into Michigan.
The health system and Beaumont Health, the largest health system in Michigan, said Wednesday they were in talks on a potential merger that would create a health system that would employ more than 100,000 people and have revenue of more than $17 billion a year.
The boards of both health systems have approved a nonbinding letter of intent to move forward with the discussions.
Beaumont Health, which has eight hospitals in southeast Michigan, employs 38,000 people and had revenue of $4.7 billion last year.
The health system reported operating income of $196.3 million and net income of $390.2 million, including investment gains on its reserves, last year.
“Beaumont Health has built a strong reputation for clinical excellence, education and research,” Jim Skogsbergh, president and CEO of Advocate Aurora, said in a statement. “This is a unique opportunity to explore a partnership with a like-minded, purpose-driven organization.”
Earlier this year, Skogsbergh set out the goal of doubling Advocate Aurora’s size by 2025 and increasing its revenue to $27 billion a year.
Mergers and acquisitions among health systems and hospitals have increased sharply since 2010. But now mergers among large health systems that cross state lines and create regional systems are becoming more common.
“No question in my mind we are going to see a wave of bigger deals,” said Steve Messinger, president of ECG Management Consultants.
Advocate Aurora itself was created by the merger of Aurora Health Care, the largest health system in Wisconsin, and Advocate Health Care Network, the largest in Illinois, in April 2018.
The health system had operating income of $481.1 million and net income of $1.5 billion, including $1 billion in investment gains on its reserves, last year. It ended the year with an investment portfolio and cash reserves of roughly $9 billion, excluding reserves for self-funded insurance, and $12.8 billion in revenue.
Larger health systems potentially can lower costs through efficiencies in purchasing, information technology, administration and clinical care. They also can have more resources to invest in new technology and initiatives.
But numerous studies have found consolidation results in higher hospital prices —though not when health systems in two different states combine.
Advocate Aurora and Beaumont Health both are respected and well-run health systems, said Messinger, whose firm has done work for the two health systems in the past.