Advocate Aurora Health and Atrium Health announced Friday the two providers have closed their merger deal, becoming the nation’s fifth-largest nonprofit health system by revenue.
The new system, Advocate Health, will generate revenue of more than $27 billion and operate 67 hospitals and more than 1,000 sites of care in six states. The system expects to treat nearly 6 million patients each year.
Industry observers were closely watching the deal to see whether federal regulators would bring a challenge to the cross-market merger in the healthcare space.
Historically, if these merger deals closed without a challenge it signaled that regulators chose not to take action, Jim Burns, chair of the Williams Mullen Antitrust and Trade Regulation Practice Group, told Healthcare Blog.
However, the Federal Trade Commission warned last year that it had been hit with a “tidal wave” of merger filings and could not review all deals before required deadlines.
When asked whether the system had heard from the FTC and whether the agency decided to forgo challenging the deal, Advocate Health told Healthcare Blog, “We have taken all necessary action related to any regulatory approvals.”
The two systems do not have any geographic overlap, an aspect that has tripped up prior hospital mergers.
Instead, economists told Healthcare Blog, the FTC is likely to examine insurer overlap in the case of Advocate Health. The combined entity operates in Illinois, Wisconsin, Georgia, North Carolina, South Carolina and Alabama.
Employers with multiple locations and employees in these six states “might have a reason to be concerned about any potential change in bargaining leverage of these two systems when it comes to negotiating with, say, UnitedHealthcare,” Leemore Dafny, a Harvard Business School professor and former deputy director of healthcare and antitrust at the FTC, previously told Healthcare Blog.
The combined entity will be led by both CEOs for the first 18 months, after which time Advocate’s CEO Jim Skogsbergh will retire, leaving Atrium’s CEO Eugene Woods as the sole leader.
The board of the new system will have an equal number of members from each organization. Atrium’s board chair Thomas Nelson will lead the combined board until the end of next year. Michele Richardson, Advocate Aurora’s board chair, will succeed Nelson with a two-year term.