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Butler Health System and Excela Healthboth based in Pennsylvania, finalized their merger on January 1. The two health systems merged to form a five-hospital system that is now the third largest in the state, after UPMC and Allegheny Health Network.

The new health system will generate more than $1 billion in revenue and serve a population of 750,000 in western Pennsylvania. The new entity will employ about 7,300 people and have more than 1,000 doctors and practitioners, Butler and Excella said.

The five hospitals operated by the new entity span three Pennsylvania counties. They are in the following cities: Butler, Clarion, Mount Pleasant, Latrobe and Greensburg.

Organizations initially announced their plan to merge in June and signed definitive merger agreement in November. The final agreement and other legal documents have been submitted to the state and federal governments for review, the health systems said.

The merger comes at a financially challenging time for both organizations. Butler reported an operating loss of $5.9 million on operating income of $114 million for the third quarter of 2022, and Excela reported an operating loss of $2 million on operating income of $163 million for the same period. Pittsburgh Post-Gazette reported.

Ken DeFurio, CEO of Butler, will serve as CEO of the new health system. John Sfon, CEO of Excela, will retire in March. He will remain as an advisor for several months and will remain a trustee of the new company.

“This was a critical step in bringing the two organizations together,” DeFurio said in a statement. “Over the past year, both boards have invested a tremendous amount of work, time and energy to determine whether this merger makes sense. We now look forward to realizing the opportunities we have identified and discovering new ones.”

Sfon agreed, calling the merger a “watershed moment” in the history of the two organizations.

The new health system doesn’t have a name yet. However, Butler and Excella said they plan to release more information about the new entity – including its name – in the “next few weeks”.

Both organizations stressed that although the deal is now complete, there is still a lot of work to be done to create the new integrated health system.

“It is important to emphasize that a merger process of this magnitude is very complex and requires an approach that is very thoughtful and diligent,” DeFurio said in a statement. “We can now continue to focus on integrated governance, executive structure and other elements that are key to effective and efficient care delivery.”

The deal struck by Butler and Excela is the first hospital merger completed in 2023. Some of the largest hospital mergers completed last year were the deals between Atrium Health and Advocate Aurora Health and between Intermountain Healthcare and SCL Health.

Photo: Dmitrii_Guzhanin, Getty Images

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