Midwest hospital merger to form $10B system moves ‘one step closer’

Two Midwest health systems have taken a significant step toward a merger that would create a system with 56 hospitals and $10 billion in revenue.

Bill Gassen, president and CEO of Sanford Health, left, and Brian Hoerneman, MD, interim CEO of the Marshfield Clinic Health System.

Sanford Health and the Marshfield Clinic Health System said they have signed an agreement to come together. The systems announced the affiliation agreement this week.

The health systems said they hope to complete the deal by the end of the year, and it would represent one of the largest hospital deals of 2024. When the deal is finalized, Marshfield Clinic would join Sanford Health, which would be the name of the merged organization.

Sanford Health, based in Sioux Falls, S.D., operates 45 hospitals and more than 200 clinics, serving patients in South Dakota, North Dakota, Minnesota and Iowa. Marshfield Clinic, based in Marshfield, Wisc., runs 11 hospitals and more than 60 clinics in Wisconsin and Michigan’s upper peninsula.

Both organizations also operate health plans and serve largely rural areas. The merged organization would have 425,000 health plan members.

Bill Gassen, president and CEO of Sanford Health, hailed the agreement.

“This significant milestone means we are one step closer to bringing together our nonprofit, community-focused health care organizations,” Gassen said in a statement. “We are excited to strengthen access to cutting-edge care and invest in new initiatives to serve the needs of patients throughout the rural Midwest, now and in the years ahead.”

Marshfield Clinic has been looking for a merger partner for some time.

The Wisconsin system had initially planned to merge with Essentia Health in Minnesota. But in January, the organizations said that they would not be coming together after all. Marshfield Clinic has faced financial challenges and announced furloughs in January to cut costs..

But the deal with Sanford is moving closer. Brian Hoerneman, MD, interim CEO of Marshfield Clinic, said joining Sanford is the right move for the organization.

“In Sanford Health we found a partner that closely aligns with our culture, mission, and values, and we look forward to continuing on this journey as the premier rural health system in the United States,” Hoerneman said in a statement. “Our shared commitment to excellence, quality and safety, and delivering an exceptional patient experience for the rural communities we serve makes this partnership a win for our patients and our dedicated teams that carry out our mission daily.”

Sanford Health also had planned a merger with Fairview Health Services in Minnesota. But some elected officials objected to the planned deal and they announced last summer that they were dropping their merger plans.

Fitch Ratings gave Sanford a stable outlook in a September 2023 report, noting the system’s diverse mix of revenue sources from its providers, insurance plan and long-term care division.

“Sanford's geographic multi-state dispersion (located in four states for acute care services), solid market presences and the fact that it's not dependent on any one location for operational success, continues to be a notable credit positive,” Fitch said.

Sanford and Marshfield Clinic first announced plans to come together in July. The Sanford-Marshfield Clinic deal was the largest announced transaction in the third quarter, according to Kaufman Hall, the consulting firm.

There were 27 announced hospital mergers and acquisitions in the third quarter of 2024, which represented the biggest number of third quarter deals in seven years.