Jefferson plans to acquire Lehigh Valley Health Network, creating system with 30 hospitals

Jefferson, the Philadelphia-based health system, is planning to acquire the Lehigh Valley Health Network, the two organizations said Tuesday.

Jefferson says it plans to acquire Lehigh Valley Health Network. The organizations said Tuesday they have signed a letter of intent to come together.

Jefferson and Lehigh Valley have signed a non-binding letter of intent to consolidate. If regulators approve the deal, the combined system would operate 30 hospitals, more than 700 sites of care, and more than 62,000 faculty and staff. The combined system would have $14 billion in revenue, The Philadelphia Inquirer reports.

The organizations say they hope to complete the transaction in 2024, and they say they’ll operate as separate entities until the deal is closed.

Jefferson operates 17 hospitals and over 50 outpatient care locations throughout the Philadelphia region and in southern New Jersey. Jefferson also includes Jefferson Health Plans, a managed care organization providing health coverage in Pennsylvania and New Jersey. Thomas Jefferson University is also home of Sidney Kimmel Medical College and Jefferson College of Nursing.

Lehigh Valley is based in Allentown, about an hour from Philadelphia, and serves the northeastern portion of Pennsylvania. Lehigh Valley operates 13 hospitals and other healthcare sites.

• Read more: Big deals: Looking at the major hospital mergers of 2023

Assuming the deal is approved, Jefferson CEO Joseph Cacchione would serve as the chief executive officer of the combined organization. Lehigh Valley CEO Brian Nester would serve as executive vice president and chief operating officer, as well as president of the Lehigh Valley Health Network. Nester would report directly to Cacchione.

In the consolidation, Baligh Yehia would serve as executive vice president and chief transformation officer, and president of Jefferson Health.

The leaders of the organizations said the deal would expand healthcare choices in the Lehigh Valley, including greater access to oncology, heart services, neurology and transplants. They cited the potential to improve health equity and make it easier for vulnerable populations to get care. Combined, they said they would be able to lower healthcare costs and more effectively manage population health.

Like many hospitals nationwide, Jefferson has struggled financially over the past two years. In the 2023 fiscal year, Jefferson reported a $78.5 million loss, which was down from a $125.8 million loss in the previous year, according to financial statements.

The systems said Jefferson’s acquisition of Lehigh Valley would lead to improved financial viability and allow for more investments in treatment and research and development.

“The healthcare landscape and our communities’ needs are changing; it is critical leading systems evolve and make investments in the future of care and wellness—growing and protecting access to enhanced, affordable, high-quality and innovative care, particularly for historically under-served patients,” Cacchione said in a statement.

“Combining Jefferson’s and LVHN’s resources will allow us to meet the changing needs of our diverse communities faster, more efficiently and more effectively,” he said.

Nester said Lehigh Valley is “thrilled” to be coming together with Jefferson.

“In Jefferson, we have found an ideal partner that shares our culture and commitment to excellence in clinical care and a learning environment, and that has done a fabulous job in establishing a highly successful health plan with a sharp focus on the well-being of Medicaid and Medicare beneficiaries,” Nester said. “The expertise derived from these operations is becoming a crucial competency for health systems to deliver on their mission, and Jefferson Health Plans will help drive improvements in health outcomes, especially in vulnerable populations.”

Jefferson’s planned acquisition of Lehigh Valley represents a bold step since the arrival of Cacchione, who took over as CEO in September 2022. In an interview with Chief Healthcare Executive® last year, Cacchione said he hoped to push Jefferson to new heights.

“The collective assets of Jefferson, including the multiple hospitals, the university, the medical school and our insurance company, all those things are a great recipe for success,” Cacchione says. “I think there’s been a lot of success at Jefferson in the past, and we’re looking to take it to a new level of success.”

Cacchione also said he hoped to improve health equity. “We have to do better for those patients that oftentimes get left behind,” he said.

More hospital mergers have been taking place in 2023, and analysts expect to see more M&A activity in 2024.

However, the Federal Trade Commission has been applying more scrutiny to hospital consolidations, scuttling some deals. The FTC took legal action to block John Muir Health’s planned purchase of San Ramon Regional Medical Center from Tenet Healthcare Corp. The organizations said in recent days they’ve dropped their plans.

The FTC has been more aggressive in taking action against planned deals in the same market, but Jefferson and Lehigh Valley operate in separate areas of Pennsylvania, so that could alleviate regulators’ concerns. BJC Healthcare and Saint Luke’s Health System, which operate in different parts of Missouri, said in November they reached an agreement on their consolidation and had secured the approval of regulators.