JPM24: Corewell Health's merger is saving $200M per year. Here's what it learned along the way

SAN FRANCISCO — Nearly two years after Beaumont Health and Spectrum Health merged to form Michigan’s largest health system, Corewell Health, executives said their combination is already delivering $200 million in annual savings.

Speaking at the J.P. Morgan Healthcare Conference, Chief Financial Officer Matthew Cox said that the organization milestone—an estimate shared around the time of the deal—has so far been buried underneath other investments Corewell has made related to the integration, such as rebranding or standardization of EHR and enterprise management software across locations.

Starting in 2025, however, “we’re going to see that $200 million a year that we’re saving translate more to our bottom line, versus the investments we’re making right now that offset it,” Cox said.

The savings themselves are split between Corewell’s supply chain, revenue cycle and marketing, each of which benefited from enterprise-wide standardization, the CFO said. Of note, the “secret sauce” of those achievements and 2025’s eventual $200 million was the establishment of an integration management office that tracked all of the savings and investments from day one, he continued.

“We know that by doing things in a standardized way, in a coordinated way, we can save the dollar,” he said. “And I’ve got a spreadsheet that I can show everybody to prove that these savings are real, and they’re something that we can replicate in the future.”

With much of the integration process now in the rear-view, Cox and CEO Tina Freese Decker shared with attendees a slew of other priorities and learnings from their 2022 merger.

Among the former: being clear about expectations and operating model, over-communicating and over-listening, committing to goals early in the process, moving quickly and accepting tension.

The partnering organizations also found success when they placed major emphasis on “systemness,” or identifying culturally as a single entity; integrating their tech stack; committing to quality; and working with employees to develop the new Corewell brand,” Freese Decker said.

The combination wasn’t without its hurdles, but the CEO said that each organization was generally prepared to handle the bumps. Rather, the main shock to the partners was 2022 and 2023’s shift in public sentiment toward healthcare workers from thank you messages to “disrespect,” which she said was difficult for employees to stomach amid the upheaval and stress of the merger.

“And so, there’s a lot of focus on how do we help our team members navigate through this disillusionment time and help them cope with mental health with all the other elements that are going on,” she said. “I’d love to see more changes happening across our field and our country about how do we recognize the amazing care, passionate care that’s provided every day by people who do good. We need to bring more of that back, and so I’d like to see a turn in 2024 where we value our healthcare workers even more.”

Outside of the integration talk, Cox shared that the system is weighing whether to issue more debt before the end of the year to accelerate Corewell’s 10-year capital plan.

He also took time to tout the financial advantages that come with a “payvider” business structure. The system’s Priority Health, which offers insurance plans to Michigan residents, expanded its coverage during the merger and is now delivering stronger margins and serves as a “natural hedge” against downturns in care delivery volumes, Cox said. Meanwhile, having both providers and insurance allows Corewell to test processes, like high-risk Medicare clinics, internally.

“When they work, we can go to other insurance companies and scale it. We can also go to other providers in the state of Michigan and scale it,” Cox said. “We think that gives us a strategic advantage because when you’re testing with house money, it’s a lot less risk than when you’re testing with a third party.”