Butler Health System, Excela Health Enter Definitive Merger Agreement

Butler Health System (BHS) and Excela Health have entered into a definitive merger agreement to form a new hospital system that will serve 750,000 patients in western Pennsylvania.

The agreement comes fives months after the health systems signed a letter of intent to merge back in June.

“Today’s announcement represents a major step forward in the process to redefine locally-controlled, community-based care,” Ken DeFurio, president and chief executive officer of BHS, said in the press release. “Our commitment to our patients in providing high-quality, low-cost sophisticated care in our region will be the cornerstone of the new entity.”

The merger would create a five-hospital system consisting of Butler Health System and Clarion Hospital—currently part of BHS—and Excela’s Frick Hospital, Latrobe Hospital, and Westmoreland Hospital.

BHS is an independent community health system serving patients in western Pennsylvania. It employs 3,000 staff members and more than 270 providers, making it the largest employer in Butler County and the biggest healthcare employer in Clarion County.

BHS offers various services, including palliative care, cardiology, maternity care, psychiatric care, and primary care services.

Excela Health, located in Westmoreland County, PA, is a tertiary-based health system that serves more than 23,000 inpatients, 700,000 outpatients, and 100,000 emergency visits annually. The health system is a leader in cardiovascular care, orthopedics, maternity care, and emergency medicine, according to the press release.

The merged health system will employ around 7,300 staff and more than 1,000 physicians and practitioners who will care for 750,000 people in western Pennsylvania. Additionally, the merged system would generate over $1 billion in revenue.

The organizations plan to announce a name for the new health system at a later date.

The definitive merger agreement signals the health systems’ initiation of state and federal regulatory approvals, which they expect will be complete by the end of the year.

“This is a very important development for our respective organizations and the proposed new system,” said John Sphon, chief executive officer of Excela Health. “We are now one step closer in realizing a goal that will have a dramatic and positive impact on healthcare for those we serve.”

According to the letter of intent, the merger aims to improve access to care, reduce healthcare costs, and boost patient health outcomes. Sphon and DeFurio expressed that the merged systems will “present the requisite scale to accelerate and elevate its relevancy and essentiality in the region’s highly competitive healthcare marketplace.”

In addition, the leaders cited the health systems’ cultural alignments, mutual respect, and shared vision on industry transformation as drivers of the merger.

Healthcare merger and acquisition activity has fluctuated in 2022. Merger and acquisition revenue hit a record high in the second quarter of the year, with 13 deals generating $19.2 billion, Kaufman Hall found. Two of the deals were considered mega transactions, where the smaller entity has an annual revenue of more than $1 billion.

However, healthcare merger and acquisition activity dropped in Q3, with ten transactions generating $8.3 billion in revenue. Similar to Q2, two of the transactions were mega transactions.