Bon Secours Health System announces intent to merge with Mercy Health

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Maryland-based Bon Secours Health System, which operates two inpatient hospitals in Greenville, announced plans on Wednesday to merge with Ohio-based Mercy Health.

The merger is expected to create the fifth largest Catholic health system in the country, with $8 billion in net operating revenue, 57,000 employees, and 43 hospitals across seven states in the eastern United States, according to a news release.

“The mission, vision, values and geographic service areas of Bon Secours and Mercy Health are remarkably well-aligned and highly complementary,” said Richard J. Statuto, president and CEO of Bon Secours Health System. “This merger strengthens our shared commitment to improve population health, eliminate health disparities, build strength to address social determinants of health, and invest heavily in innovating our approaches to health care.”

Bon Secours Health System and Mercy Health plan to work with a consultant in the coming months to finalize a definitive merger agreement by the end of the year.

The merger, once finalized, will not affect patients or employees at local facilities. It will, however, create a new health system with a larger geographic service area and allow for economics of scale, according to a news release.

Officials said the new system, which is expected to have a $293 million operating margin, will be restructured so it can reinvest resources back into local communities.

“As consumers grapple with the implications of Health Care Reform in a dynamic marketplace, Mercy Health and Bon Secours share a vision to improve the health of the communities we serve as the low-cost, high-value provider,” said John M. Starcher, Jr., president and CEO of Mercy Health. “Working together, our strong faith-based heritage fuels our mutual focus to provide efficient and effective health care for each patient who comes through our doors.”

The proposed merger between Bon Secours Health System and Mercy Health comes at a time when an increasing number of hospitals across the country are turning to mergers, affiliations, and partnerships to navigate the changing health care landscape.

Fifty-two mergers and acquisitions were recorded in the first half of 2016, a 6.1 percent increase from the 49 transactions recorded in the first half of 2015, according to a study by Kaufman, Hall & Associates, a strategic and financial consulting firm in Skokie, Ill.

In South Carolina, Greenville Health System and Palmetto Health recently partnered to form the largest health system in the state with 1.2 million patients a year, $3.9 billion in annual net revenue, and more than 28,000 employees. If approved by the Federal Trade Commission, the affiliation would create a new company under which both hospital systems will operate, and would become one of the 50th largest hospital systems in the nation.

Experts say mergers, acquisitions, and partnerships between health systems typically result in higher prices but no discernable bump in quality.

The Robert Wood Johnson Foundation found in 2012 that hospital mergers generally resulted in higher prices, sometimes by more than 20 percent in already concentrated markets. Price increases, however, are mostly a concern for mergers of health systems in the same geographic market, according to Clemson University associate professor of economics Matthew S. Lewis, who has studied hospital competition.

Officials at Bon Secours Health System and Mercy Health plan to work together in the coming months to decide organizational structure and look at branding “that continues to attract new patients while clearly leveraging our rich Catholic heritage,” according to news release.

“We are excited about the prospect of two like-minded health systems joining forces to advance our mutual health ministry and improve the health of our communities,” said Katherine Vestal, chairperson of Mercy Health Board of Trustees. “The synergistic alignment of our mission and values make this merger a natural fit.”

Read the full announcement below:

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