The arrangement would put the growing Detroit-area health system in a position to compete on the other side of Lake Erie, within portions of Ohio.
Two nonprofit health systems in the Great Lakes region announced Tuesday that they are thinking about combining their enterprises, which represent a total $6.1 billion in annual revenues.
Beaumont Health, based in Southfield, Michigan, and Summa Health, based in Akron, Ohio, said they have signed a letter of intent to develop a strategic partnership. Under the deal, Summa would maintain its own local leadership and local board but ultimately become a wholly owned subsidiary of Beaumont, the organizations said.
"One of our strategic goals is to become a regional health care leader," said Beaumont board chair John Lewis in a statement. "The planned addition of Summa Health allows us to take one step closer to achieving this key strategic priority."
Beaumont is an eight-hospital system centered in southeast Michigan with $4.7 billion in annual net patient revenues, and Summa is a four-hospital system with $1.4 billion in annual revenues, according to their announcement. Combined, they employ about 45,000 people.
One factor that makes this potential deal especially interesting is the way the combined system would find itself toe-to-toe with another major player, says consultant Allan Baumgarten, a long-term observer of healthcare industry trends.
"It puts Beaumont basically in direct competition with the Cleveland Clinic," Baumgarten tells HealthLeaders.
There are two major hospitals in Akron, he explains. Summa Health owns one, and Cleveland Clinic owns the other. If this deal were to be finalized, Baumgarten says it would give Beaumont Health a chance to demonstrate that it can deliver high-quality care while controlling costs, perhaps persuading patients and payers to pick Beaumont's facilities over Cleveland Clinic's.
Beaumont Health CEO John Fox said his organization and Summa Health are each already strong and successful.
"By welcoming Summa into the Beaumont family, both organizations will share expertise, invest in each other and continue to thrive as the industry evolves," Fox said in a statement. "As we expand into Ohio, we will continue to invest in our Michigan employees and operations."
Beaumont plans to launch 30 new urgent care centers this year, and its plan to build a new mental health hospital and three new outpatient campuses are ongoing, Fox added.
Summa Health CEO Cliff Deveny, MD, said multiple health systems from not only Ohio and Michigan but also other states reached out after Summa Health announced last year that it is looking for a potential partner.
"Our board believes Beaumont Health would position our leadership, physicians and employees for continued success and enhance the quality of care provided to our patients in Akron and Northeast Ohio," Deveny said in a statement.
"Beaumont understands and supports our commitment to the communities we serve and will invest in our future growth in Ohio," he added.
Summa Health board chair Anthony Lockhart said the organization began looking for a partner to make sure the organization could continue to thrive in a shifting healthcare landscape.
"We looked at many potential partners and believe Beaumont Health is the best fit because of this organization's support for our strong cultural values and alignment with our mission to provide compassionate, quality care," Lockhart said in the statement.
The announcement notes, also, that Summa's insurance product SummaCare would be able to expand into new Ohio markets and that Summa's experience in risk-based insurance contracts and services could benefit Michigan employers, too, if this deal is finalized.
By many measures, Beaumont has demonstrated its ability to reap the benefits of major M&A activity, says Baumgarten, the consultant. Beaumont had been a successful three-hospital system that dominated a portion of the Detroit suburbs, he said, then it merged five years ago with Oakwood Health System and Botsford Health Care (after scrapping earlier plans to merge with Henry Ford Health System).
"They've been financially reporting very good results since that large merger, and they've also been expanding both their ambulatory and their inpatient facilities," Baumgarten says.
Although leaders from Beaumont and Summa cite some familiar goals for their potential union, there's always cause for skepticism in light of past performance of M&A activity among healthcare providers, Baumgarten says. Merging systems often say they expect to improve quality, expand access to specialty services, and reduce costs, he says, but increases in market power are often used more for the financial benefit of the combined system than for the local communities, employers, or others who pay for the healthcare the system provides.
“It puts Beaumont basically in direct competition with the Cleveland Clinic.”
Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.
Photo credit: Summa Health System's campus in Akron, Ohio (Provided)
The two systems operate a total of 12 hospitals and employ about 45,000 people.
The potential merger would follow Beaumont's apparent M&A success from about five years ago.
Operating within Akron, Ohio, would juxtapose Beaumont Health with the Cleveland Clinic.