Merger of two huge health systems would have implications in Indiana

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Once again, Indiana is smack in the middle of a huge health care consolidation.

The latest news is that Ascension, the parent of St. Vincent Health, is talking to Providence St. Joseph Health about a possible merger that would create the largest U.S. owner of hospitals. The talks were originally reported in the Wall Street Journal.

Such a move could add more muscle to two already strong, growing health systems—and could mean a huge player with unprecedented reach, with 191 hospitals in 27 states and annual revenue of $44.8 billion.

The two have overlapping operations only in Texas and Washington state.

The concentration of two huge hospital systems could eliminate jobs, as hospitals combine back-office functions, such as billing and collections.

Earlier this year, St. Vincent announced plans to cut dozens of medical transcription jobs at its Carmel campus, and shortly afterward, the health system outsourced the jobs to a Chicago-based company, R1 RCM. That company, in turn, advertised on its website for medical transcription workers at an office in Gurgaon, India.

The move might also set off a scramble for physician recruiting in Indiana, as health systems here try to compete against St. Vincent, which would suddenly be able to recruit through a huge, combined company with national reach. St. Vincent is now the second-largest hospital operator in Indianapolis, behind Indiana University Health.

And of course, combining operations would give Ascension and Providence larger heft to negotiate better rates with insurers.

Insurers have been pushing hard to keep hospital prices low. That was a key reason behind last week’s megadeal, in which CVS Health Corp. said it would pay $69 billion deal for Aetna Inc., a move that would help it steer patients into its own drug stores and walk-in clinics. The move would also help Aetna keep its members out of costly emergency rooms and physician clinics.

National health experts are already speculating how such a huge combination of hospitals might work.

“The new group could have some extra juice with big insurers because of its sheer size,” according to an analysis by Bloomberg Gadfly. “But, ultimately, health care markets are mostly local. And you can bet insurers will band together in any market where this combination creates a provider monopoly.”

And this from the Wall Street Journal: “American hospitals have a target on their backs. The latest merger talk is an attempt to rally their strength, but industry payers’ battle against high health-care costs shows no sign of letting up.”

And from Fortune: “A merger would be consistent with a broader trend toward mega-mergers in health care, albeit one that has had a few bumps on the road,” including the planned mergers of Catholic Health and Inititiatives and Dignity Health; and of Advocate Health Care and Aurora Health Care.

Of course, one of the biggest planned mergers in health care went down in flames just a few months ago, when Indianapolis-based Anthem scrapped plans to buy rival Cigna Corp., after a federal judge blocked the deal on antitrust grounds.

So the odds of the Ascension-Providence deal happening? “A merger is far from assured,” the Wall Street Journal said. And talks have included “a variety of arrangements short of a merger.”

Stay tuned, but don’t go anywhere. It’s only Monday. Another health-care deal could spring up any day.

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