The planned merger of Indiana University Health and Kokomo’s Howard Regional Health System is now dead, the two hospitals announced Monday.

The integration of the two not-for-profit hospital systems was approved by Howard Regional's board in late May. At the time, Howard Regional officials said they needed the economies of scale of a larger system because of deteriorating demographics in its trade area and the threat of lower reimbursement from the 2010 health reform law.

But now Howard CEO Jim Alender is citing the uncertainty of health reform as the reason for cutting off discussions with IU Health.

“There are several reasons we changed our strategic direction,” Alender said in a prepared statement released Monday. “Many of these relate to the uncertainty surrounding health care reform and the long-term forecast for the health care industry. We know change is coming, but we do not know the form of these changes given the ongoing debates in Washington and the litigation over health care reform.”

IU Health CEO Dan Evans said the two hospitals will continue to work in partnership.

IU Health had been on an acquisition streak in the past year, combining with Morgan Hospital & Health Center in Martinsville and signing agreements with White County Memorial Hospital in Monticello as well as Howard Regional.

These smaller hospitals say they need IU Health’s help recruiting physicians, particularly specialists, as well as help in bearing the costs of sophisticated electronic medical record systems, which the federal government is now effectively mandating.

IU Health is interested in securing a steady stream of patients to keep its massive hospitals in downtown Indianapolis humming, as well as earning profits at outlying hospitals to support the downtown campuses.