One of the big reasons for Intermountain Healthcare, Sanford Health merger: their insurance plans

 Intermountain Medical Center
Intermountain Healthcare and Sanford Health plan to merge, it was announced Monday. (Intermountain Healthcare)

When it comes to their size by revenue, total number of employees and care sites, Salt Lake City-based Intermountain Healthcare and Sioux Falls, South Dakota-based Sanford Health aren't all that different. 

While they come from different religious traditions, both are faith-based, non-profit organizations.

"Numerically, we're almost identical twins in terms of the healthcare delivery side," said Sanford Health's CEO Kelby Krabbenhoft in a call with reporters.

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Why merge now?

"It's the insurance piece that has challenge Sanford in recent times. We've had an insurance company for 25 years and we do a good job with it in this region. But we're stuck," Krabbenhoft said. "To grow outside this region with our insurance in a mobile society has become a daunting challenge for Sanford Health. Meeting an organization like Intermountain Health with their reach, with their reputation and their insurance company being four or five times the size of our insurance company, really was the missing ingredient ... what makes this one different? It's that. It really solves a problem for us."

On Monday, board members from both Intermountain — which was founded by The Church of Jesus Christ of Latter-day Saints — and Sanford, which was started by Lutherans, signed a letter of intent to develop a strategic partnership. They expect the deal to close in 2021, pending federal and state approvals. 

Officials announced Marc Harrison, M.D., president and CEO of Intermountain Healthcare will be president and CEO of the new organization while Krabbenhoft will become president emeritus. Both organizations will continue operating under their current names for the foreseeable future, officials said. 

The organization would be headquartered in Salt Lake City while keeping corporate offices in Sioux Falls.

RELATED: Intermountain, Stanford Children's CEOs say hospitals need to get comfortable being a 'frenemy'

Krabbenhoft pointed out the deal is not the result of financial distress by either organization.

"It's really two great healthcare organizations that don't have any crisis, no scandal, no problem, no financial issues coming together and saying 'What can we do?'" he said. 

The combined organization would have about $12.5 billion in annual revenue — about $7.7 billion from Intermountain and $4.8 billion from Sanford.

It would employ more than 89,000 people — roughly 41,000 from Intermountain and 48,000 from Sanford. It would operate 70 hospitals, including 24 from Intermountain and 46 from Sanford. It would operate 435 clinics across seven states, including 225 from Intermountain and the rest from Sanford.

It would also provide senior care and other services in 366 locations in 24 states, and insure 1.1 million people. 

During the call discussing the deal, Harrison told reporters Intermountain's health division SelectHealth — which has members in Utah and Idaho— covers just shy of one million members and takes full risk on three-quarters of a million people in a value-based care arrangement, he said.

"We have achieved some pretty extraordinary outcomes ... As a very large, integrated delivery system, we provide the full spectrum of tertiary and quaternary care," Harrison said.

On the merger, the CEOs tackled several topics including: 

  • Potential changes for patients: In the short run, patients should see no changes in their experience at the two organizations, Harrison said, but in the long run it will create new ways for the partners to grow their telehealth and growth digital health investments. "Having a larger system will allow us to make deeper investments," he said. 
     
  • Future expansions: "We think the vision of affordable, high-quality care that's meant to keep people well is going to be extraordinarily attractive," Harrison said. "We believe there are going to be hospitals and systems across the interior west of the U.S. that are going to want to join the team. We are looking for strong organizations. We want the number one or number two player in any given market. We want organizations that are not highly distressed, but on sound footing."
     
  • Jobs: Among the questions they faced was the partnership comes with the potential for layoffs. Krabbenhoft said Sanford heard similar concerns amid its merger with Meritcare in 2009. But that deal led to "the largest medical center ever built in the northern Great Plains," he said, referring to the construction of Sanford Medical Center Fargo, and an "almost a doubling of employment in the greater Fargo region because of a merger," Krabbenhoft said. "I'm not going to predict the same thing with this merger, but I think the odds are so much more significantly on the side of momentum and growth and opportunity with what we're putting together here today that I think people should just look at the past history of this organization, that I can speak for, in terms of what happens with the workforce."

    Harrison said he had nothing to add to Krabbenhoft's comments. "That's a great answer and I love the optimism," Harrison said. 

Existing trustees from both systems' boards will join to form a combined board and a new executive committee of the board will be created with equal representation from members of the Intermountain and Sanford Health boards, officials said. Gail Miller, current chairwoman of the Intermountain Board, will serve as board chair for the merged organization.

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