This Week Health

Advocate / Aurora / Atrium -> A Merger creates the 5th largest health system by revenue in the country. Today, you get my take on what it might look like for this merger to be done right.

Transcript

Today in health, it atrium and advocate come together to form the fifth largest health system in the country. My name is bill Russell. I'm a former CIO for a 16 hospital system and creator of this week. Health. I sent a channels dedicated to keeping health it staff current and engaged.

We want to thank our show sponsors who are investing in developing the next generation of health leaders, Gordian dynamics, Quill health tau site nuance, Canon medical, and current health. Check them out at this week. health.com/today. All right. Today's story. Let me give you some of the details on this advocate, Aurora.

Atrium combination. So advocate Aurora health and atrium health said Wednesday. They planned to merge creating one of the nation's largest nonprofit health systems with 27 billion in combined revenue and 67 hospitals across six states. Board members from both systems unanimously approved the agreement, which is subject to regulatory review. The combined entity will be led by both CEOs for the first 18 months. At which time advocate's CEO, Jim Scottsburg.

as the chair until the end of:

One with operations in the Midwest and the other with a four state reach in the south, the deal creates a joint operating company. No assets will be transferred as part of the combination. Wednesday statement said, however, a single board. And one executive team will lead the combined organization, which will operate under the brand advocate health with headquarters in Charlotte, North Carolina.

Local markets will still bear the advocate, Aurora health and atrium health signage advocate. Aurora health operates 27 house hospitals in Illinois. And Wisconsin with annual revenues of about 14 billion atrium health operates, 40 hospitals throughout North Carolina, South Carolina, Georgia, and Alabama atrium generates annual revenues of about 13 billion wake forest university. School of medicine will serve as the academic hub for advocate health.

Uh, , let's say this another way. Atrium health and African Aurora health plan to merge into a 67 hospital with upward of 27 billion in revenue and nearly 158,000 employees combined. All right. So that gives you a picture of this scale and scope of this thing each year in president and CEO, Eugene Woods and advocate, Aurora president CEO, Jim Scottsburg will lead the combined health system as co-CEOs for the first 18 months from then Mr.

Jennifer will retire. As we talked about earlier and Mr. Woods will become the sole CEO. This is the fourth strategic combination announced by atrium health in five years, previously, atrium has announced strategic combinations with Georgia base Navicent health, North Carolina based wake forest Baptist health, and Georgia based Floyd health system.

One of the things that we've learned through COVID is that the digital world and telehealth has no state boundaries would said Tuesday, we're looking to create a national system so we can serve communities better.

And that is what we know. What is my, so what on this, as you know, in these stories, I try to close with a, so what, this will be a pretty lengthy. So what a couple things to say about this. ,

this is a tough regulatory environment for hospital mergers, but two regional systems with no overlap puts this merger on what I think is solid footing. I believe the state of Illinois. Will exact some concessions as. As they lose a headquarters, perhaps the state of Wisconsin, but probably less likely.

, these are normal in these kinds of large deals. It will be in the form of employment agreements, keeping employees employed for a certain amount of time and that kind of stuff and investments in health-related state initiatives, maybe mental health, , or clinics or opening some things to that effect.

But either way, this is on solid footing. , we're seeing a new kind of merger where it is no longer an acquisition. But the formation of a new joint operating company. These new affiliations mean that you end up with a new board made up from the two entities and you end up with new leadership team made up from the two entities.

This creates an awful lot of uncertainty for certain parts of the organization, which can be a major distraction for everyone involved. The clarity and speed at which the distraction is removed is the key to the success. Of the merger going forward. This takes courage from the board and new leadership. And to be honest, I'm encouraged that gene woods.

Is going to, , lead this moving forward because he has shown the courage to make the necessary. Moves to ensure a quick and smooth transition. When combining entities in removing the uncertainty. ,

From what I saw and heard from the outside, the advocate award deal was not handled with the same level of decisive decision-making that you would want in this kind of merger. , the merger that I often talk about as a model for mergers was bond scores, mercy under the leadership of John Starcher, , the mercy CEO at the time I listened to John presents several times at the JPM conference over the years.

, when these two entities came together, he talked about his formula to reduce the uncertainty and move. Into an efficient operation very quickly. , he named the leadership quickly, , that at that top level of leadership. , they've done that with the board and CEO in this deal, which is great.

The next move is to determine the operation leadership, the executive leadership team of the combined entity as quickly as possible. In the case of Bon Secours mercy, I forget the number, but I think it was either 30 or 60 days. They named that executive leadership team. Uh, , with the next level of leadership, the leadership level one level down identified 30 days after that.

This is going to reduce the churn at the virtual water cooler, the conversations that naturally happen and eliminate the risk of losing key employees, which is critical at this time when it's so hard to find. , great staff in this market. ,

The next move was even more impressive to me. They pick the technology winners in the first 30 to 60 days of that merger. , he talked about not wanting to lose brain cycles or credibility for that matter by churning. Turning over easy decisions. He said, you know, we know which. EHR we should go with, so, so why form a committee? It takes six months to discuss it.

He talks about the need to also have a single build of the EHR as quickly as possible. Get there quickly pick the ERP solution, pick the EHR solution and the other core systems in that next 30 to 60 days. Removing the uncertainty and get the operation moving on the work. That's going to matter as quickly as possible.

I believe this merger will move through regulatory relatively smoothly.

There will be some bumps in the form of demands and chatter from political officials. But I see no reason this won't get through. I will be watching to see the decisiveness of the people decisions and after that, the technologies decisions, and that's going to be my proxy to how the integration is going to go.

If you were with another organization. My, so what for you is don't get caught up in the disconnect of geographic markets. Yes, it is Chicago and the south. But healthcare is national and virtual. Look at it in terms of market essential reality advocate, Aurora and atrium are all essential players in their markets. This is different than say the common spirit Chi merger where common spirit.

Had to digest a myriad of bad acquisitions that c H I had made over the years. , this kind of baggage is another level of complexity and distraction. If you're asking, can my health system be acquired, , the best case scenarios that your health system is essential in your market, worst case is that you're like the number three player

, in the markets that you serve. And in most cases, that is the definition of non essential in cases where you're looking for a savior, someone to come in and rescue, there is not a great market for that kind of acquisition. These days. If you are essential, someone has probably. I already talked about a strategy.

That includes you in a merger or a partnership over the last couple of years, it doesn't mean you will be acquired. It just means that you're an attractive target. If you're a larger health system that acquires, I've talked about this many times, you should have a playbook for acquisition. Plan for the inevitability of acquisition or partnership. In fact, your technology platforms should have that as part of their design requirements.

How are you going to grow? How can you scale up what you have when you make these kinds of acquisitions?

When this happens, you should know how to handle the first 60 days security communication, connectivity, collaboration. You should also know how to handle the first 60 days. Post-close EHR ERP packs, a disaster recovery. Have a plan and adjust the plan. Accordingly.

An acquisition shouldn't naturally be a huge win for the consulting organizations with the right planning. You really should have this, and you really probably already do have this. You have great teams already in place, especially the large organizations. And, uh,, you just need to take the time, put the plane, these together include it in your architecture and you should be ready to go.

All right. That's all for today. Stay tuned. We will discuss this further as more details. Come through on this story. If you know someone that might benefit from our channel, please forward them a note. They can subscribe on our website this week. Dot com or wherever you listen to podcast apple, Google, overcast, Spotify, Stitcher.

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