Sanford calls off Intermountain merger after CEO mask uproar

Dive Brief:

  • A merger between Intermountain Healthcare and Sanford Health is off following the recent departure of Sanford’s CEO Kelby Krabbenhoft, according to a Friday release.
  • The two systems had planned to team up to operate 70 hospitals and 435 clinics, insuring 1.1 million people and generating an estimated $13 billion in combined annual revenue. The deal was expected to close in 2021, pending regulatory approvals.
  • Krabbenhoft left his top executive role of 25 years on Nov. 24 after sending an email to staff saying he had COVID-19 and wouldn’t be wearing a mask, purporting he had recovered from the virus and has immunity — sparking controversy throughout the system and local communities.

Dive Insight:

The two regional powerhouses announced the deal in October and were expected to face minor pushback from antitrust regulators, given little overlap in their respective hospital markets.

Utah-based Intermountain operates 24 hospitals across Utah, Nevada and Idaho while South Dakota-based Sanford operates 46 hospitals in both North and South Dakotas, Minnesota and Iowa.

But the uproar and subsequent replacement of Krabbenhoft, who has served as CEO since 1996, squashed the deal. South Dakota has been among the most hit in the current wave of coronavirus cases sweeping the nation and his nonchalance about mask wearing was too much for the health system.

It was Sanford that ultimately ended the talks, though, according to a statement from the system. “Given the leadership change, Sanford Health has decided to pause current merger and acquisition activity while they address other organizational needs,” the organization said.

The merger’s end signals the second failed deal for Sanford. It also failed to close a merger with UnityPoint Health last year.

Following Krabbenhoft’s exit, Sanford immediately appointed Bill Gassen, who most recently served as chief administrative officer and has been with the company since 2012, as its new CEO.

“Recently, the former CEO of our organization shared his personal opinions about COVID-19, causing frustration and disappointment among our staff and patients. His comments do not represent our values and principles as health care providers,” Gassen said in a memo after Krabbenhoft was shown the door.

Intermountain CEO Marc Harrison said the system is ​”disappointed but understand the recent leadership change at Sanford Health has influenced their priorities.”

Ron Shinkman contributed reporting.

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