The largest healthcare system in the Intermountain area, Intermountain Healthcare, Inc. (IHC), consisted of 25 hospitals, 225 clinics, and SelectHealth, an insurance company with more than 900,000 members. Almost all of IHC’s facilities were located in Utah. Their CEO had expressed an interest in expanding, but given their market share (above 50 percent in most area markets), they had been exploring the possibility of merging with health systems outside their immediate area.

In October 2020, they signed a letter of intent to merge with Sanford Health, located in South Dakota and Minnesota, with the hope that the larger size ($12.5 billion in revenues) would give the combined company more political clout and that SelectHealth could flourish in Sanford Health’s markets. However, by December 2020 the proposed merger was canceled.

Nevertheless, almost a year later IHC announced a planned merger with Catholic-affiliated SCL Health, headquartered in Denver, Colorado. SCL had only 8 hospitals and 160 clinics, which were spread across Colorado and Montana. None of either system’s geographical service markets overlapped. The shortest distance between an SCL hospital and an IHC hospital was 233 miles (Spanish Fork, Utah, to Grand Junction, Colorado). The greatest distance involved a Montana hospital: 550 to 600 miles distant.

IHC’s CEO was very optimistic about the potential merger and stated that the systems enjoyed complementary assets and that the “contiguous nature” of both systems would offer great opportunity. After consummation of the merger, the combined company was projected to generate about $14 billion in revenue. The merger was completed in April 2022.

Questions 

1. What are potential positives of the IHC and SCL merger?

2. What economies of scale might result from the merger?

3. What will be difficulties in accruing benefits from the merger?