Sanford Health, Marshfield Clinic Health System unveil $10B merger plan

Midwest health systems Sanford Health and Marshfield Clinic Health System announced plans Wednesday to explore a merger forming a 56-hospital, $10 billion revenue nonprofit heavyweight.

Both organizations have a recent history of scuttled mergers but said the “complementary assets and capabilities” of their cross-market deal would deliver stronger patient and community care across their combined footprint.

The arrangement would have Marshfield Clinic’s Wisconsin and Michigan facilities become a region within the larger Sanford Health, which would serve as the parent company and maintain its Sioux Falls, South Dakota, headquarters. Together, they would employ almost 56,000 people with 4,300 providers across the hospitals, two fully integrated health plans (serving over 425,000 members), specialty pharmacies and research institutions.

“We are who we are today because of combinations with care delivery organizations in rural communities across America’s heartland,” Sanford Health President and CEO Bill Gassen said in the announcement. “These opportunities have allowed us to follow through on our promise to deliver world-class health care to every patient we serve no matter their zip code, and we are eager to continue building on this track record with Marshfield Clinic Health System.”

The pair said they have signed a nonbinding memorandum of understanding and expect the deal to close by the end of the year pending regulatory processes and closing conditions.

Gassen would remain at the head of the resulting organization, while Marshfield Clinic’s interim CEO, Brian Hoerneman, M.D., would become president and CEO of the Marshfield Clinic Health System region.

“Partnering with Sanford Health presents an incredible opportunity for our organizations to unify and establish the premier rural health system in the nation,” Hoerneman said in a statement. “Together, we will ensure sustainable access to exceptional care for our communities for years to come.

Marshfield Clinic could use the stability of the larger organization. The 11-hospital, 12,000-employee system reported $3.1 billion in revenue during its 2023 fiscal year but a $250.8 million operating loss. In 2022 and 2021, its operations had lost $367.9 million and $60.2 million, respectively, collectively leading the nonprofit to furlough and then lay off about 3% of its workforce earlier this year. It since reported a narrow $12.6 million operating gain in the quarter ended March 31.

Sanford, meanwhile, reported $7.2 billion in revenues and a $402.2 million operating gain during its fiscal 2023, more than doubling the $192.3 million it’d logged the year prior. The system touted the $1.5 billion it invested across its South Dakota, North Dakota, Minnesota and Iowa communities over the past decade and said it would be investing at least half a billion into its new partner over the next five years.

If combined, the organizations promise to throw their weight behind broader population health, value-based care and novel approaches to care delivery. Echoing the promises of other merging health systems with academic ties, they also pointed to expanded clinical trial access and greater workforce training and recruitment potential.

“This partnership is a win-win for the patients and communities we serve, and for our organizations that have had a long tradition of innovation, physician leadership and dedicated caregivers,” Lauris Molbert, chair of Sanford Health’s board of trustees, said in a statement.

The newly announced merger is likely safe from federal regulators, whose scrutiny of provider consolidation hasn’t extended to cross-market mergers like that of nearby Froedtert Health and ThedaCare.

However, Sanford and Marshfield Clinic’s sordid history with health system mergers outlines the local and organizational difficulties organizations may face.

Sanford's past three merger attempts with other major nonprofit systems have all fallen through the cracks. These include a merger planned with UnityPoint Health in 2019 and a failed 2020 combination with Intermountain Healthcare, which was preceded by the sudden resignation of controversial Sanford CEO Kelby Krabbenhoft.

Most recently, Sanford’s board scratched a planned combination with Fairview Health Services nearly a year ago. The decision came after the pair repeatedly bumping back key deadlines amid pushback from Minnesota labor groups, the Fairview-affiliated University of Minnesota and the state’s attorney general.

Marshfield Clinic, meanwhile, had seen a merger with Gundersen Health System fall apart in 2019. It was later slated to combine with Essentia Health until the deal was called off in early January after about two years of talks.

Essentia, at the time, pointed to Marshfield Clinic’s rough finances as “the primary factor” in its decision to walk away, though that deal was also under tight scrutiny from Minnesota’s attorney general. Marshfield Clinic furloughed workers shortly after.