Duluth, Minnesota-based Essentia Health and Marshfield, Wisconsin-based Marshfield Clinic Health System have scrapped their plan to merge into a 25-hospital Midwest system.
The two nonprofit health systems said in a statement that they have "engaged in meaningful discussion" over the last two years about how the organizations could combine their unique strengths.
"We have decided that a combination at this time is not the right path forward for our respective organizations, colleagues and patients," the health systems said in a statement posted to Essentia Health's website Friday.
"We will continue to seek opportunities for collaboration as two mission-driven, integrated health systems dedicated to sustainable rural health care. Our organizations have great respect for one another, and we each remain committed to strengthening the health of our communities as we deliver high-quality, compassionate patient care," health system leadership said.
Essentia Health and Marshfield Clinic shared plans in October 2022 to investigate a potential merger. The health systems signed an integration agreement in July that would comprise a network of 3,800 providers and 150 sites of care, including 25 hospitals. The proposed combined entity would serve over 2 million rural and mid-urban Midwest residents.
Three months ago, Minnesota Attorney General Keith Ellison said he was reviewing the pending health system merger under a recently passed state law that gave his office additional authority to determine whether the deals are in the public interest.
Nonprofit Essentia Health operates 14 hospitals, 77 clinics, six long-term care facilities and other operations in its home state of Minnesota as well as North Dakota and Wisconsin. The nonprofit integrated health system employs 15,000 people and serves patients in Wisconsin, North Dakota and Minnesota.
Essentia Health CEO Dr. David Herman said the health system continues to focus on "building innovative partnerships and transforming care for its communities."
Marshfield Clinic Health System often describes itself as one of the largest rural integrated systems in the country. The nonprofit employs over 12,000 people across 11 hospitals, a health plan, research and education programs and other care locations. It is geographically adjacent to Essentia, operating throughout Wisconsin and in parts of Michigan.
“Essentia Health and the Marshfield Clinic Health System are high-performing, well-respected, community-focused organizations. Those similarities served as the basis for efforts toward a combination," MCHS Interim CEO Dr. Brian Hoerneman said in a statement.
"As we now move our separate ways, Marshfield Clinic looks forward to advancing our 100-year legacy of providing compassionate and accessible care to the communities we serve," Hoerneman said.
This is the second time in just over four years Marshfield Clinic Health System has been in merger discussions that failed. In December 2019, Gundersen Health System and Marshfield Clinic Health System decided to remain separate companies after several months of discussions to integrate, the Marshfield News Herald reported.
Public financial disclosure documents show MCHS reported in its third quarter report that its operating earnings before interest, depreciation and amortization (EBITDA) for the first nine months of fiscal year 2023 was at a 0.1% margin, down from 0.8% the year before. MCHS’ operating EBITDA dropped from $18.4 million the year before to $2 million this year, a decrease of $16.4 million.
The system generated an operating loss of $133.5 million (‐5.8% margin), compared to an operating loss of $92.6 million in the prior year, a decrease of $40.9 million. MCHS generated total revenues of $2.32 billion compared to $2.28 billion generated in the prior year, an increase of $41.4 million.
For fiscal year 2023, Essentia Health reported $2.8 billion in revenue and operating income of $110,000. Expenses rose 8.4% to total $2.7 billion during the year, which ended Jun. 30.
Net income jumped to $121.7 million for the year, compared to a net loss of $72 million in 2022, according to its unaudited financial statement.