Lehigh Valley Health Network and Philadelphia-based Jefferson Health on Tuesday announced plans to merge, a move that leaders of the health care systems say would expand access to care for patients in the Lehigh Valley.
LVHN and Jefferson have signed a non-binding letter of intent to create an integrated care delivery system. If the plan goes through, the merger would result in a network with a national research university, an expanded not-for-profit health plan, 30 hospitals, more than 700 outpatient sites, and more than 62,000 employed faculty, clinicians and staff across eastern Pennsylvania and southern New Jersey. Annual revenue would be estimated to be $12 billion to $14 billion.
Thomas Jefferson University in Philadelphia as well as Jefferson Health Plans, formerly Health Partners Plans, which offers Medicaid, Medicare and CHIP plans, will be part of the merger.
Dr. Brian Nester, president and CEO of LVHN, said in an interview Tuesday that the two health systems began serious talks of merging about six months ago. He said Jefferson Health is a system that combines primary care, specialty care and insurance coverage all under one umbrella, and LVHN becoming part of that is the primary motivation behind the merger. The type of model Jefferson uses the integrated delivery and financing system, was created to reduce waste in medical spending, improve coordination of care, create better population health outcomes and increase access to care.
But he added that there is a lot for both to gain. He said the university and medical school will help bring more talent into the Lehigh Valley and the expansion of the health plan will improve care for many, especially those who are currently underserved.
“It’s not commercial insurance. It’s focused on taking care of people that tend to be highly concentrated in Medicaid and Medicare and also working folks that are in the exchange and have Affordable Care Act products,” Nester said. “If you give better care you make it more available, [if] you get patients engaged they’ll have better outcomes and won’t require hospital service or unnecessary therapies — that will ultimately lower the cost of care.”
Dr. Joseph Cacchione, CEO of Jefferson, said the system acquired what is now Jefferson Health Plans less than two years ago and its integrated approach is a better way to deliver care and finance health care.
“When Medicaid patients come into most hospitals their care is fragmented and often episodic and anecdotal. When the provider now owns the premium dollar, their impetus is to make sure those patients get care on a relatively frequent basis and access to care,” Caccione said. “We think we can do better for patients at a lower cost to the community and to the state when it’s all said and done.”
Nester added that the merger will allow both systems to expand and improve their specialties.
“We’ll be able to take the best of our programs and invest into their programs and capitalize on creating even deeper services that will be even more accessible in areas such as orthopedics, heart, vascular, cancer care and neurosciences,” Nester said.
Cacchione said the health care landscape and needs in each system’s respective communities are changing, and the merger represents an evolution, one that will grow and protect access to affordable, high-quality and innovative care. He said this is especially true for patients from historically under-served backgrounds and communities.
“When we had the first meeting with Brian Nestor and his team, the similarities in terms of strategy and our commitment to population health and where the systems saw themselves going, that synergy, that congruence between the two systems gave a strategic foundation — that we could probably do more together than we could do separately,” Cacchione said.
But before the two nonprofit health systems can merge, further negotiations are needed, as is the execution of a definitive agreement. The deal also requires regulatory approvals and completion of yet-to-be-set closing conditions.
Should the deal close Jefferson’s CEO Dr. Joseph Cacchione will continue to serve as CEO of the entire combined network. Nester will serve as executive vice president under Cacchione and as president and chief operating officer of “the legacy Lehigh Valley Health Network.” Jefferson’s Dr. Baligh R. Yehia will also serve as an executive vice president under Cacchione but will hold the roles of chief transformation officer and president of “the legacy Jefferson Health.”
Nester said LVHN and Jefferson will submit documents for review by the Federal Trade Commission in January. He added the merger will also need approval from the state, including the offices of Governor Josh Shapiro and the state attorney general.
While Nester said he does not want to be overly optimistic, he hopes the two systems can acquire all regulatory approvals within a year, something he attributed to the limited overlap between the two network’s footprints. Though both networks have locations in Montgomery and Bucks counties, for LVHN it’s primarily urgent care centers, though Lehigh Valley Hospital-Gilbertsville, the network’s second neighborhood hospital, is under construction in Montgomery County. Jefferson has general and specialty hospitals in each county.
Nester said that LVHN and Jefferson will need to combine their respective strategic plans but he doesn’t expect this will change LVHN’s existing plans for new facilities, including the under-construction LVH-Macungie and LVH-Gilbertsville hospitals.
“I’m very comfortable that they respect our strategic plan and will continue to build those assets that are part of our vision for the future in the region,” Nester said.
It is unclear what downsizing would occur as a result of the merger or what positions or departments may be affected, though Nester said any restructuring or changes of the sort wouldn’t occur immediately.
“As we develop an integration plan together we will be looking for those synergies whether they’re back office or otherwise and take advantage of extraordinary efficiencies you get out of IT investments. I don’t see any immediate changes at all,” Nester said. “I don’t think we’d be announcing any plans to shutter this service at all or contract this department or division at all right away.”
“Right off the bat, this is driven by getting access to a model which we think is superior, the integrated delivery and financing system model. We will be looking for synergies certainly but I think they’ll be liberated over years.”
Cacchione didn’t have much to say on this topic either, beyond that they trust LVHN’s leadership is responsible and always looking to increase efficiency.
“In the early days, to the average employee, it will probably be business as usual for the most part. I don’t anticipate that a nurse at Lehigh going to have any different of a day than he or she does today. Similarly at Jefferson. Over time we’re going to need to take the best practices of both facilities and turn those into the new entity’s best practices. We have the opportunity to get the best of both worlds.”
Name and branding changes are also a mystery for now. Nester said LVHN and Jefferson are leaders within their respective markets and any rebranding would need to be respectful of their established identities. However, he added that the details haven’t been hashed out yet.
LVHN traces its start to 1899 when Allentown Hospital opened at 17th and Chew streets. The health network’s flagship location on Cedar Crest Boulevard in Salisbury Township opened in 1974 as a joint venture between Allentown and Sacred Heart hospitals. Sacred Heart later pulled out of the venture, and the medical center eventually became known as Lehigh Valley Hospital-Cedar Crest.
The ensuing decades saw massive growth for the health network, which acquired hospitals from the Poconos, Hazleton and in Schuylkill County as well as Coordinated Health, which was integrated into Lehigh Valley Orthopedic Institute. In recent years, LVHN has opened new hospitals in Northampton and Carbon counties.
State Rep. Peter Schweyer, D-Allentown, said in a statement he would continue to communicate with LVHN through the merger process and do everything possible to ensure the job security of LVHN staff and that the quality of care patients expect remains intact.
“I was an employee of Sacred Heart Hospital, an independent healthcare provider, that merged with another healthcare network. I understand that consolidations can be worrisome to neighborhoods, patients, and employees,” Schweyer said. “But, when done right, mergers can mean quality patient care remains, jobs are not lost, and communities see economic development and investment.”
Jefferson also has a history of acquiring new hospitals and networks including Abington Health in Montgomery County, Kennedy Health System in New Jersey and Einstein Healthcare Network, along with others.
