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Analysis

3 Reasons Providence St. Joseph, Ascension Didn't Merge

By Philip Betbeze  
   May 24, 2018

Rod Hochman, MD, president and CEO of Providence St. Joseph Health, says he's focused for now on 'deconstructing' the traditional health system.

Toward the end of 2017, the Wall Street Journal cited anonymous sources in reporting that a merger between Providence St. Joseph Health and Ascension might be imminent. That story proved more than a little premature.

Then in late March, anonymous sources reported again that those discussions had halted. Pundits and journalists were left to speculate as to whether those talks were legitimate or just rumor.

HealthLeaders Media recently spoke with Rod Hochman, MD, president and CEO of Providence St. Joseph Health, who opened up about the extent of the merger discussions and shared why the union with Ascension didn't happen. 

Following is a lightly edited transcript of that conversation.

1. Not ready to go national

HealthLeaders Media: Rod, there were rumors about discussions with Ascension to combine with Providence St. Joseph Health. How real were those discussions, and how far did they get?

Hochman: We did have those discussions. What we wanted to explore was the possibility of the two organizations coming together. We have a lot of respect for each other. If we wanted to get to a national scale, they are [an organization] we'd love to work with.

We put a lot of time and effort into it, but both organizations have a lot of work to do in 2018. Sometimes it's just knee-jerk to say, 'Let's go ahead and do it,' but we learned a lot about each other. Since then, I had dinner with Tony [Anthony Tersigni, president and CEO of Ascension] at a conference in Phoenix. I've known him forever and our people like each other.

What we both said is we've done a lot of good work, but now let's just execute on what we have to do in 2018 and possibly look at it again after that. The timing wasn't right.

2. Asymmetric partnerships attractive

HLM: Do you feel like your health system ultimately needs a national scope?

Hochman: Scale matters, but we need to do it for the right reasons. There has to be a method to it. That's what we studied carefully [with Ascension].

I heard a speaker talking recently about the Aurora-Advocate merger. Neither are struggling, but advocacy and the balance sheet are strengthened by coming together. We've been growing substantially over the past eight years but always for the right reasons.


Related: Ascension and Providence St. Joseph Halt Merger Talks


At some point, if the opportunity came for something that would give us a national presence, we would look at it. But we're also as interested in partnerships that aren't necessarily full-on mergers. A good example is the generic drug coalition. We'll see a lot more of that; for example: an asymmetric partnership between an insurer, a health system, and a data company.

3. Less emphasis on hospitals

HLM: If another merger isn't on your strategic horizon, what adjustments does Providence St. Joseph Health need to make in the near future?

Hochman: We're deconstructing the traditional health system. We have been built around large hospitals. That's an old version of the successful health system, or soon will be. Our new plan makes us more digital, more ambulatory, and there's less emphasis of the hospital as the core. That's part of the execution we wanted to make sure we got done, and major mergers make some of that hard to accomplish. We're moving ahead on that at light speed.

Our bets are different than a for-profit company. We're in public housing, in education—a lot of nontraditional areas. But the rating agencies also feel confident in our strategic plan.

One big nontraditional area for us is the four-letter word: data. We're not going to be in the cloud business, so we need a data management partner. Even in areas like social media and understanding the consumer, we need good partners. Business processes too. We've got to be humble about this. Should we do them alone, or let someone else do them? Healthcare systems are one of the biggest data depositories. The resource most of us are sitting on is incredibly valuable but it has to be tapped in the right way. The advantage goes to those who partner earlier with those companies.

Philip Betbeze is the senior leadership editor at HealthLeaders.


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