Ascension's merger talks with Providence St. Joseph end as it pursues new strategic direction

Ascension and Providence St. Joseph Health have halted merger talks as Ascension embarks on a new strategic direction. 

People familiar with the negotiations said that if merger discussions were to resume it wouldn't be any time soon, according to an article from The Wall Street Journal. One of the sources told the newspaper that the talks were put on hold amid Ascension's plans to take a new strategic approach in hopes of stimulating financial growth and improving productivity. 

The WSJ reported in December that the two were discussing a potential merger, which, if approved, would create the largest hospital operator in the U.S. The joint system would have included 191 hospitals across 21 states and a combined annual revenue of $44.8 billion. 

Ascension's new direction is in response to new competition from nontraditional sites of care and pressure from payers that want to lower reimbursements, according to WSJ. The system's operating margins have declined over the past year. 

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Ascension has reduced executive pay and is looking to cut $61 million from its administrative costs in 2019, CEO Anthony Tersigni, Ed.D., told employees, according to documents obtained by the newspaper. The system also previously revealed that it will cut more than 500 jobs in Michigan, about 2.3% of its workforce in the state, as part of its cost-cutting efforts. 

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Providence, meanwhile, is also focusing on boosting its financial performance while investing more in new tech, ambulatory care and retail healthcare, according to the article. 

Though Ascension's deal with Providence is on ice for now, it did officially close its merger with Presence Health earlier this month, forming the largest Catholic health system in the country. 

Other megadeals in Catholic healthcare have been announced of late. Bon Secours Health System and Mercy Health revealed in February that they planned to join forces, while a merger between Dignity Health and Catholic Health Initiatives is expected to close later this year.