In the turbulent business of health care, bigger is often better.
Nowhere is that more evident than in the stunning announcement Monday that Emory University and WellStar Health System are talking about merging their medical assets in metro Atlanta.
If a deal is consummated, the resulting nonprofit health system would clearly be Georgia’s biggest and would comprise one of the largest such organizations in the nation.
The talks come at a time of revolutionary changes in health care, many of which were ignited by the Affordable Care Act.
That upheaval is having a profound effect in the Georgia hospital industry. Recently, GHN reported that the Texas-based chain Tenet Health is seeking a partner or buyer for its Georgia hospitals.
And Piedmont Healthcare, based in Atlanta, has begun talking about a partnership with St. Francis Hospital in Columbus, which is reeling from a $30 million accounting inaccuracy.
A merger, if completed, would combine Emory’s academic health system with WellStar’s expertise in running community hospitals.
“We want to end up with the best of community health care and the best of academic health care,’’ Emory University President James Wagner said Monday. “We hope to be a model for the Southeast and the rest of the country.”
It would also create a system with geographic reach across Atlanta and into the city’s northwest suburbs, where WellStar dominates the market.
The initial talks between the two systems will continue for 45 days, under a resolution passed by each organization’s board. Completing a merger would take a year or more, leaders of each organization told GHN.
The vision is to create a new nonprofit company containing the assets of both Emory Healthcare and WellStar. “It is a true 50/50 partnership of equals,’’ Reynold Jennings, CEO of WellStar, told GHN.
Emory Healthcare and WellStar staffers would become employees of the new entity, he added.
A merger would represent the first such combination of a leading academic health organization and a large community health system in the Southeast, he said.
The changes in hospital and physician payments helped drive the push to consolidate, Jennings said.
Health insurers and Medicare are moving more toward paying for a bundling of medical services, rather than paying for individual procedures separately.
“If you’re not in an offensive strategy, the emerging health care [changes] will put you on a defensive strategy,’’ Jennings said.
A combination would foster savings in economies of scale, he added.
Jennings said that if initial talks lead to a green light on merger plans, he will hold off on his pending retirement to work on planning for the new company.
Wagner said departing Emory Healthcare CEO John Fox has been actively involved in the discussions with WellStar. Fox is stepping down as Emory Healthcare CEO to take a similar post at a Michigan system in March.
Strength in numbers
Health systems are looking to gain more leverage in their dealings with insurers, who are ratcheting down payments, said Craig Savage, of Durham, N.C.-based CMBC Advisors, a consulting firm.
“A lot of provider systems are trying to do the same thing, to stay one step ahead,” he said.
An Emory/WellStar combination “makes a lot of sense,’’ Savage said. It could provide Emory “with more support for its teaching and research activities.”
Some Georgia hospitals have banded together in partnerships or alliances to protect their common interests. But an outright merger – such as the one Emory and WellStar are considering — is a much more solid and permanent deal. “There’s always an opportunity to walk away’’ from a partnership, Savage noted.
Emory Healthcare, with about $2.7 billion in annual revenue, has six hospitals, 200 provider locations and 1,800 physicians.
Its flagship Atlanta hospital, Emory University Hospital, has gained national attention in recent months for its role in the fight against Ebola. It was the first U.S. facility ever to treat an Ebola patient, and Emory has successfully treated all four Ebola patients admitted there.
WellStar includes WellStar Kennestone Regional Medical Center (anchored by WellStar Kennestone Hospital in Marietta) and WellStar Cobb, Douglas, Paulding and Windy Hill hospitals, along with its physicians, urgent care centers and health parks.
A merger would overshadow the remaining systems in the Atlanta area, including Piedmont and Northside Hospital.
Jennings said he intends to continue WellStar’s role in the health plan that it currently operates with Piedmont. And he said he does not think a merger with Emory would lead to any obstacles on antitrust grounds.
A 2011 hospital merger in Albany led to an antitrust lawsuit by the federal government, and the dispute has gone on for years, but metro Atlanta is a much more competitive environment.