CommonSpirit’s CHI Franciscan finalizes tie-up with Virginia Mason

Dive Brief:

  • CHI Franciscan and Virginia Mason Health System, two Washington state health systems, will now operate as one, under the name, Virginia Mason Franciscan Health. CommonSpirit Health, one of the nation’s largest nonprofit health systems, is the parent company of CHI Franciscan.
  • The combined group will operate as a nonprofit entity in Washington and is now a subsidiary of CommonSpirit, according to the agreement, effective Jan. 1.
  • Together the two will operate 11 hospitals and nearly 300 sites of care. The chief executive role will be split, at least initially, between the system’s two leaders; Gary Kaplan, former CEO of Virginia Mason and Ketul Patel, the former leader of CHI Franciscan. Patel does have an additional title, president of the Pacific Northwest for CommonSpirit. 

Dive Insight:

The pandemic did not seem to substantially dampen hospital and health system mergers and acquisitions in 2020 despite the volatility in the sector. 

M&A was largely on track with previous years at least through the first three quarters of 2020, according to research from Kaufman Hall, which will release its final review of 2020 soon. 

Still, some hospital deals were called off amid fallout from the pandemic. 

For example, Intermountain Healthcare and Sanford Health of South Dakota inked a plan to merge in late October. But those plans were scrapped in early December after Sanford CEO Kelby Krabbenhoft said in an email to staff that he wouldn’t wear a mask because he had the virus, recovered and believed he had immunity.

The mega-regional Midwest system Advocate Aurora Health planned to merge with Michigan’s largest system, Beaumont Health. But just four months later the deal was called off after pushback from Beaumont’s doctor group that wanted the system to focus on its local market and physicians.

And other deals risk falling through after being targeted by the Federal Trade Commission. 

After laying relatively low in challenging hospital mergers, the FTC attempted to block three deals last year in Memphis, Tennessee, another in Bergen County, New Jersey and one in Philadelphia, Pennsylvania.

For its part, the newly consummated Virginia Mason Franciscan Health said it plans to expand patient access points and develop innovative care delivery models, though the system did not elaborate on how it will do that. 

CHI Franciscan generated revenue of $2.45 billion and Virginia Mason reported revenue of $1.15 billion last year.

Kaplan, one of the two CEOs, previously expressed skepticism over “multiregional conglomerates” in an article that previously appeared in Seattle Business magazine. Kaplan is also a physician.

“The evidence increasingly suggests that on the espoused intentions of quality care, access to care, economies of scale, the achievements are few and far between,” he says. “The real impact is to increase prices. I don’t think that’s what our communities or our society need,” he said in the magazine.

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