Aspirus Health, St. Luke's Duluth sign definitive agreement to form 19-hospital nonprofit

Wausau, Wisconsin-based Aspirus Health and Duluth, Minnesota-based St. Luke's merger plans took a step forward Monday with an announcement that the nonprofits have signed a definitive agreement to affiliate.

The tentative deal announced back in July would see St. Luke's joining the larger, 17-hospital Aspirus.

The definitive agreement was unanimously approved by both organizations' boards and outlines terms for Aspirus to support St. Luke's.

These include at least $300 million of investments into St. Luke's strategic projects over eight years, implementation of Epic and other standardized systems within two years and the expansion of Aspirus Health Plan into St. Luke's service area within two years.

“I’m grateful for the support we’ve received as we’ve continued through this affiliation process with our like-minded partner St. Luke’s,” Matt Heywood, Aspirus' president and CEO, said in a  joint announcement. “Together, we will continue to evolve the way we care for our patients, especially those in rural areas, who will have the opportunity to access the same high level of care as patients in other parts of the country. We look forward to working with regulators on the approval of the affiliation.”

Should the deal close, the combined entity would staff nearly 14,000 people, including 1,300 employed physicians and advanced practice clinicians, across its 19 hospitals and 130 outpatient locations in northeastern Minnesota, northern and central Wisconsin and Michigan’s Upper Peninsula.

Aspirus and St. Luke’s previously said that their combination would yield “improved access to capital, strong and unified technology platforms, increased scale and efficiencies and a health plan focused on maximizing value for patients and employers.”

The health systems said their deal has picked up letters of support from all six of St. Luke's unions. Under the definitive agreement, the systems have agreed to honor all existing employment contracts as well as to retain, integrate and offer "additional opportunities" to St. Luke's employees, they said.

“For more than 140 years, we’ve taken great pride in caring for this region,” Eric Lohn, St. Luke’s co-president/CEO and chief financial officer, said in the announcement. “With the challenges facing the health care industry, including St. Luke’s, we believe that now is the time to affiliate. We are confident that Aspirus is the right partner to help us further grow and continue providing the best level of care for the next 140+ years.”

The partners said they are targeting spring 2024 for their deal close pending regulatory approvals. That could become a concern in light of Minnesota Attorney General Keith Ellison's recent announcement that he is reviewing the deal. His office was granted additional authority to determine whether nonprofit health system mergers are in the public interest earlier this year.


Aspirus Health, St. Luke's Duluth unveil plans to form 19-hospital Midwest nonprofit system

July 12

St. Luke’s Duluth in Minnesota is working on a deal to join Wisconsin-based nonprofit Aspirus Health, representing the latest in a string of Midwest hospital consolidation deals currently in the works.

The organizations announced Wednesday that they have signed a letter of intent for the two-hospital Minnesota system to become an affiliate of the 17-hospital Aspirus Health. They said they expect the deal to close in early 2024 pending due diligence, regulatory reviews and other approvals.

“From our founding days in 1881, St. Luke’s has remained patient-focused above all else,” Nicholas Van Deelen, M.D., co-president/CEO and chief medical officer at St. Luke’s, said in the announcement. “Joining forces with Aspirus Health enables us to expand access and better support clinical staff to reach even more patients.”

The combined entity would staff nearly 14,000 people, including 1,300 employed physicians and advanced practice clinicians, across its 19 hospitals and 130 outpatient locations in northeastern Minnesota, northern and central Wisconsin and Michigan’s Upper Peninsula.

The combined system would also include the home health and hospice care, pharmacies, critical care and medical goods operations of both. Aspirus Health would also bring a health insurance company and medical transportation services to the table, while St. Luke’s would contribute its two ambulatory surgery centers.

Aspirus Health’s Wausau, Wisconsin, office would get the nod as the new organization’s headquarters, while the St. Luke’s space would become a corporate office, according to the announcement. The systems said their patients will continue to receive care from their current providers over the course of the affiliation.

“We welcome the opportunity to expand into Minnesota with St. Luke’s and look forward to learning from one another and building upon our collective strengths to benefit our teams and patients,” Aspirus President and CEO Matthew Heywood said in the announcement.

Aspirus and St. Luke’s said in the announcement that their combination would yield “improved access to capital, strong and unified technology platforms, increased scale and efficiencies and a health plan focused on maximizing value for patients and employers.”

Eric Lohn, St. Luke’s co-president/CEO and chief financial officer, also said in a release that the deal helps his system meet “evolving community needs” and that the larger Aspirus will allow St. Luke’s “to accelerate investment in our communities and expand our impact faster than we can on our own.”

Aspirus reported about $47.1 million in operating income, $1.9 billion in revenue and a $22.8 million net loss during its 2022 fiscal year (ended June 30). It has made several key acquisitions in recent years to reach its current scale, most notably via a seven-hospital deal with Ascension Wisconsin in 2021.

St. Luke’s reported a slim $2.9 operating gain on $560.1 million during its fiscal 2022 (ended June 30). Substantial nonoperating losses dragged it down to a $62.7 million net loss for the year.

News of Aspirus and St. Luke's deal comes as other high-profile Midwest health systems are busy pursuing their own mergers.

One of those, involving South Dakota’s Sanford Health and Minnesota’s Fairview Health Services, would create a 58-hospital giant. It was originally set to close March 31 but has been delayed multiple times to give regulators more time to complete their reviews.

Additionally, Minnesota-based Essentia Health and Wisconsin-based Marshfield Health System signed a memorandum last October to form a 25-hospital nonprofit servicing over 2 million rural and mid-urban Midwest residents. Similar to others, the two systems said their deal would help increase access to care services for, in particular, communities in rural areas.  

In April, Wisconsin nonprofits Froedtert Health and ThedaCare signed a letter of intent to combine and form an 18-hospital system. Should their due diligence and regulatory approvals pan out, the partners said they hope to put together a definitive agreement and then launch the combined health system before the end of the calendar year.