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Analysis

Gundersen Health System, Marshfield Clinic Mulling 'Merger of Equals'

By Steven Porter  
   May 08, 2019

The two CEOs say they hope to enhance care for their communities, bring costs down, and become 'the preeminent rural healthcare organization in the country.'

Two nonprofit health systems based in Wisconsin announced this week they are thinking about merging their operations to form a top-tier rural healthcare organization.

The CEOs of Gundersen Health System, based in La Crosse, and Marshfield Clinic Health System, based in Marshfield, said their potential union would aim to enhance care for the communities they serve and bring down the cost of care—objectives that healthcare executives pursuing efficiency through mergers and acquisitions might find equally familiar and elusive.

"The world is changing, and the same is true in healthcare. We must adapt and be innovative in order to continue to deliver quality care to the communities that we serve," Gundersen CEO Scott Rathgaber, MD, told La Crosse Tribune.

"We can work on our services and how to better deliver those across the whole continuum of care," Rathgaber added. "Ultimately, together and larger, we really hope to bring the cost of care down by working with those efficiencies and bringing that directly to our patients."

While research suggests that some M&A activity among hospitals can reduce costs, there is significant variation from one deal to the next, and actual savings often underperform expectations. Savings also can depend on which hospital or system is acquiring which.

In the case of a Gundersen-Marshfield deal, however, the systems are considering a "merger of equals," Rathgaber told the Tribune.

Combining the two would form a 13-hospital system with more than 100 clinics and more than 19,000 employees serving patients across Wisconsin, northeast Iowa, and southeastern Minnesota, the organizations said in their joint announcement. Gundersen currently has six hospitals and more than 8,000 employees, and Marshfield currently has six hospitals and more than 11,000 employees. (Marshfield is also expanding a clinic in Minocqua into a 12-bed hospital that's expected to open next year.)

Although the markets served are contiguous, the geographic overlap is minimal, the CEOs said.

Scott Rathgaber, MD, and Susan Turney, MD, FACP (photos provided)

Marshfield CEO Susan Turney, MD, FACP, told the Marshfield News-Herald that discussions about the potential merger began several months ago. Each organization's board approved the discussions in recent weeks, and staff members were notified on Monday, Turney reportedly said.

There's no word yet on what a combined Gundersen-Marshfield organization would be named. Whatever is selected will honor the legacy of each antecedent, Turney told the News-Herald, noting that no layoffs are planned at this time.

"Over the last few years, we have worked relentlessly to position ourselves for the future and create a better framework for serving our patients and communities," Turney said in a statement. "While at the same time, the disruption in the industry and competitive nature of healthcare has made it vital we construct a dynamic and strong integrated health system."

"This merger would give us an opportunity to combine the unique strengths of our systems to become the preeminent rural healthcare organization in the country," Turney added.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Combining the two systems would form a 13-hospital organization with more than 19,000 employees.

Executives for each system describe the merger talks as a strategic move in response to a shifting industry landscape.

The systems operate across Wisconsin, northeast Iowa, and southeastern Minnesota.


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