Business Roundup: Lancaster General Health Joins Penn Medicine

LG Health, which generated nearly $970 million in revenue last year, and the University of Pennsylvania Health System have agreed to merge. "There is no financial transaction," says LG Health's CEO. "This is a matter of being incorporated and consolidated."

Lancaster General Health has finalized negotiations with the University of Pennsylvania Health System and will become a member of Penn Medicine, the two nonprofit systems have announced. The agreement caps more than six months of discussions, and is now subject to state and federal regulatory approval. Until then, the two systems will remain unchanged and independent.

Thomas E. Beeman, president and CEO of LGH, told reporters at a media availability that healthcare reforms are pushing the industry toward consolidations.

"Scale is going to be necessary to be able to take out costs in healthcare," Beeman said. "Just as an example, the Affordable Care Act's impact on LG Health over about seven years is close to $250 million worth of costs that we had to just take out to stay even. In order to do that you need the scale to be cost effective in the way we deliver care. That is what precipitated us looking for scale. We were fortunate to have someone like Penn located so close by."

Asked to put a price tag on the deal, Beeman called it "incalculable."

"There is no financial transaction," he added. "This is a matter of being incorporated and consolidated."

He said any reserve funds now held by LG Health will remain "unequivocally" with the health system "under the auspices of the local board, and we have provisions long-term to ensure that it stays here."

LG Health generated nearly $970 million in revenues last year. The system includes the 533-bed Lancaster General Hospital and Women & Babies Hospital, outpatient and physician offices, urgent care centers, and the Pennsylvania College of Health Sciences. The system employs more than 7,300 people.

Penn Medicine generated close to $4 billion in revenues last year and employs nearly 19,000 people at facilities that include the flagship Hospital of the University of Pennsylvania, three other hospitals, and the Perelman School of Medicine.

The two health systems have collaborated on cancer care for decades, and in 2014 the formed a collaborative that gives LG Health patients access to specialty services at Penn Medicine.

Beeman says the LG Health board began to evaluate its options five years ago.

"We believe that LG Health was of a great size, but not to be a consolidator; to be someone that participated and was additive to another health system that could be a consolidator," he says. "At just over $1 billion we didn't have the size or scope to want to rescue other institutions. We were strong on our own, but the ability to partner with an exceptionally strong internationally recognized organization was really paramount."

Under the merger, LG Health's governance would continue under a local board of trustees, LG Health's CEO, and representatives of Penn Medicine. LG Health would also gain seats on the University of Pennsylvania Health System board. LG Health's community benefit efforts would continue and be governed by the LG Health board. The Pennsylvania College of Health Sciences will remain a part of the LG Health.

"Since forming our strategic alliance more than a year ago, we've learned our cultures are similar and that we share a passion for excellence, aimed at improving health and providing more value at less cost," Penn Medicine CEO Ralph W. Muller said in prepared remarks. "Tremendous synergies and opportunities are possible by combining two of Pennsylvania's financially strongest and clinically advanced systems."

Five TX Health Systems Launch ACO
Five health care systems in North Texas have launched an accountable care organization for employers in the region that they're calling of Forward Health Partners.

The five systems are Children's Health, Cook Children's, Methodist Health System, Texas Health Resources, and UT Southwestern Medical Center. Combined, Forward Health Partners includes 42 hospitals, 72 outpatient facilities, more than 1,300 primary care physicians, and more than 4,100 specialists, who will provide service to members of participating health plans and self-insured employers in the Dallas/Fort Worth area.

"It brings us together under a governance situation," says Jesse Beck, vice president of strategic marketing at Texas Health Resources. "We are 162-B physician-led, which gives us the ability to take risk. What makes it unique is our ability to take risk on this. We can go to employers and plan sponsors and offer unique solutions."

Beck says Forward Health's target customers are "self-funded employers who realize that healthcare benefit spend is not a one-year journey. It's looking at the long-term solutions."

"We've done a lot of research in the marketplace and we found five common themes employers are looking for around their healthcare spend: Cost containment; cost certainty; quality; member experience; and simplicity," Beck says.

"It's not just how do we save the employer money, but also how do we ensure that their employees and members are having a great experience."

The ACO will work together on common goals, but each health system will serve its own patients and preserve its independence. Each system will have equal representation in the ACO governance.

"The future of healthcare will encompass a comprehensive approach to care management, including both medical and behavioral," said Melissa Gerdes, MD, CMO of Outpatient Services and ACO Strategy at Methodist Health System, and board member of Forward Health Partners, in prepared remarks.

"(That) will require tight-knit, community-based care teams to measurably improve the health of patients and the community.  This coalition brings together some of the best health care providers in North Texas as a resource to create a healthier community."

Ill. Hospital Association, MCHC Merge
The board chairs of the Illinois Hospital Association and the Metropolitan Chicago Healthcare Council have signed a letter of intent to merge, the two industry groups announced.

"As the health care community continues to evolve, it is crucial that organizations like MCHC and IHA leverage their significant strengths to support their members' efforts to enhance the quality of health care for all Illinoisans," Dean Harrison, president/CEO, Northwestern Memorial HealthCare and IHA Board Chair, and Michael S. Eesley, CEO, Centegra Health System and MCHC Board Chair, said in a joint statement.

The announcement comes after nearly a year of discussions that began last July, when both organizations floated the merger idea with MCHC and IHA leaders. "Any organization created from the joining of MCHC and IHA will undoubtedly be greater than the sum of its parts," said Jim Skogsbergh, president/CEO, Advocate Health Care and chair-elect of the American Hospital Association.

"Both MCHC and IHA are financially strong, results-oriented entities that empower their respective members to provide the highest quality of care to the patients and communities they serve. I look forward to the tremendous opportunities for innovation and enhanced outcomes that this alignment will offer health care providers across Illinois and on a national level."

The process is expected to be completed by the end of the year.

The two associations said the merger will allow them "to grow current offerings" for their members in areas such as business, revenue, technology, data analytics and information to support population health management, and improve access to high-quality value-based care.