Big Midwest Health Systems Advocate Aurora And Beaumont ‘Explore’ Merger

Two of the largest hospital operators in the Midwest — Advocate Aurora Health and Beaumont Health — are “exploring a potential partnership,” the companies disclosed Wednesday morning.

“Following approval last week by the Boards of Directors, today both organizations signed a non-binding letter of intent that paves the way to deeper discussions to create a leading health care system that would span across Michigan, Wisconsin and Illinois,” Beaumont and Advocate Aurora Health said in a statement.

Advocate last year was formed via the merger of Illinois-based Advocate Healthcare and Wisconsin’s Aurora Healthcare and executives of the combined company have said they plan to grow in the future to further expand their footprint.

One reason hospitals say they need to grow is to find scale to negotiate with health insurance companies that pay them and are becoming even larger.

CVS Health, which operates drugstores and a large drug benefit manager, bought Aetna, the nation’s third-largest health insurer, more than a year ago while the health insurer Cigna bought the pharmacy benefit manager Express Scripts. Meanwhile, UnitedHealth Group, the nation’s largest health insurer, is looking to grow its health plan business as well as its Optum healthcare services unit which owns hundreds of doctors practices, urgent care centers and surgery centers across the country.

In the case of Advocate Aurora and Beaumont, executives described the talks as in “early stages” but acknowledged the “partnership under exploration would allow both not-for-profit health providers to strengthen and align their purposes of serving the needs of individuals, families and communities throughout the Upper Midwest.”

The merger is likely to get close scrutiny from federal and state antitrust regulators and executives acknowledged they have already alerted state regulators in Illinois, Wisconsin and Michigan. “Both systems will work closely with state and regulatory agencies throughout the process, which began with notifications to all three Attorneys General earlier this week,” the health systems said in a statement. 

Advocate Aurora Health bills itself as one of the 10 largest “not-for-profit, integrated health systems” in the U.S. serving nearly 3 million patients annually in Illinois and Wisconsin via more than 500 sites of care that include hospitals, doctor’s offices, urgent care centers and other facilities. Beaumont, meanwhile, is Michigan’s largest healthcare system with total annual “net patient revenue of $4.7 billion” from healthcare facilities that include eight hospitals and 145 outpatient care sites.