Advocate Aurora, Beaumont Health Call Off Healthcare Merger Deal

Advocate Aurora Health and Michigan’s Beaumont Health will not move forward with a proposed healthcare merger deal.

The health systems announced late last week that they have agreed to end merger discussions about five months after announcing the signing of a non-binding letter of intent. The discussions were put on hold by summer as both health systems focused on responding to the COVID-19 pandemic.

The healthcare merger deal would have combined the largest health systems in Michigan, Wisconsin, and Illinois to create a $17 billion health system.

“We continue to have a very high regard for Advocate Aurora Health,” John Fox, president and CEO of Beaumont Health, said in a joint statement Friday. “But at this time, we want to focus on our local market priorities and the physicians, nurses and staff who provide compassionate, extraordinary care every day.”

Beaumont Health, which operates 8 hospitals and 167 outpatient locations in Michigan, faced criticism from some of its physician leaders over the proposed merger with Advocate Aurora Health.

Physician leaders circulated a no-confidence petition in late July calling for the firing of Fox and executive vice president and CMO David Wood Jr., MD. The petition cited concerns about patient care and loss of “local control” if the health system were to merge with Advocate Aurora Health, Crain’s Detroit Business reported.

The local news source later reported that Mark Shaevsky, a former Beaumont Health board vice chair and trustee, sent a letter to Michigan's attorney general urging the termination of Fox, Wood, and Beaumont Health’s COO Carolyn Wilson.

Beaumont Health did not give a reason as to why it ended merger talks with Advocate Aurora Health, but Fox did acknowledge in a call with reporters on Friday concerns about the proposed merger.

"Over the past few months, we have listened to the perspectives of many physicians, nurses, staff, donors, elected officials and community members about a variety of topics and their concerns about a potential partnership with Advocate Aurora, and we very much appreciate their candid feedback," Fox said.

Fox also said the pandemic was one of the reasons talks with Advocate Aurora Health disintegrated.

The COVID-19 pandemic has dampened some healthcare merger and acquisition plans in 2020, including another planned merger for Beaumont Health.

The health system called off healthcare merger talks with Ohio-based Summa Health in May. A definitive agreement signed in January was to make Summa Health a subsidiary of Beaumont Health, but both health systems agreed to part ways after delaying talks during the pandemic.

But healthcare experts expect healthcare merger and acquisition activity to pick up speed again after the pandemic.

“If anything, the pandemic has demonstrated advantages of scale, coordination, and innovation that are likely to strengthen the strategic rationale for future partnerships,” healthcare consulting firm Kaufman Hall stated in its most recent M&A Quarterly Report.

The report found that healthcare merger and acquisition announcements were down in the second quarter of 2020, but not significantly. There were 14 announced transactions compared to 29 the previous quarter and 19 during the second quarter of 2019.

In the joint statement, Advocate Aurora Health indicated its plans to keep growing.

“We have great respect for Beaumont Health, and we continue to believe scale will play a critical role in advancing quality, accelerating transformation and reducing cost in the healthcare world of tomorrow.” said Jim Skogsbergh, president and CEO of Advocate Aurora Health.

Skogsbergh announced at the J.P. Morgan conference earlier this year that the health system plans to grow revenue to $27 billion and serve 10 million patients by 2025. At the time, the health system had revenues of about $12 billion.