Philadelphia-based Jefferson Health and Allentown, Pennsylvania-based Lehigh Valley Health Network (LVHN) have taken the initial steps toward a $14 billion merger, the systems announced Tuesday.
The organizations said they have signed a non-binding letter of intent under the vision of creating “a leading integrated care delivery system,” which would include Thomas Jefferson University and a bolstered nonprofit health plan.
Pending further negotiations, regulatory approvals and closing conditions, the combined 62,000-employee system would span 30 hospitals and over 700 care sites in Pennsylvania and New Jersey. The systems are targeting a 2024 close.
“The healthcare landscape and our communities’ needs are changing; it is critical leading systems evolve and make investments in the future of care and wellness — growing and protecting access to enhanced, affordable, high-quality and innovative care, particularly for historically under-served patients,” said Joseph G. Cacchione, M.D., CEO of Jefferson, in the announcement. “Combining Jefferson’s and LVHN’s resources will allow us to meet the changing needs of our diverse communities faster, more efficiently and more effectively."
The organizations’ announcement said the merger would reduce the cost of care and expand the footprint of their “distinctive clinical services lines that meet patient needs and address health disparities.”
Other highlights include improved financial stability, permitting greater investment into “innovative treatment capabilities” and other research and development; academic opportunities for health professionals and new grads; and the expansion of Jefferson health plans into LVHN’s service area, which would “strengthen patient choice” for “vulnerable and at-risk populations covered by Medicare and Medicaid.”
“Together—with our combined network of resources and sites of care, managed care expertise, education and research capabilities—we will have the ability to make significant improvements to health outcomes and address health disparities in this region, and beyond, to the benefit our communities, patients, physicians, faculty, staff, students and health plan members,” Cacchione, who would retain his CEO role, said.
A successful merger would yield a system with roughly $14 billion in annual revenue. It would become Pennsylvania’s second-largest nonprofit system, behind Pittsburgh-based UPMC.
Jefferson, under parent organization Thomas Jefferson University, is the larger of the two systems with over 42,000 employees, 17 hospitals and its nonprofit health plan. The organization ran just three hospitals in 2015 but achieved its current scale through a flurry of merger and acquisition activity—though strained finances prompted a restructuring earlier this year. In August it reported a $231 million operating loss for the 2023 fiscal year.
LVHN runs 13 hospital campuses plus a network of 29 health centers, over 300 physician practices and other locations in eastern Pennsylvania. It employs about 20,000 people and reported a $10.4 million operating income in fiscal 2023.
“In Jefferson, we have found an ideal partner that shares our culture and commitment to excellence in clinical care and a learning environment, and that has done a fabulous job in establishing a highly successful health plan with a sharp focus on the well-being of Medicaid and Medicare beneficiaries,” Brian Nester, president and CEO of LVHN, said in the announcement. The expertise derived from these operations is becoming a crucial competency for health systems to deliver on their mission, and Jefferson Health Plans will help drive improvements in health outcomes, especially in vulnerable populations.”
While Jefferson’s Cacchione would hold the joint organization’s mantle of CEO, Nester would be named executive vice president and chief operating officer as well as president of the legacy LVHN. Baligh Yehia, president at Jefferson Health, would pick up a role as executive vice president and chief transformation officer while serving as president of the legacy Jefferson Health.
A Board of Trustees and other leadership team positions will be hashed out in the definitive agreement, but “will be comprised of members from both systems,” according to the announcement.