Oct. 26, 2020

Sanford Health plans to merge with Utah-based Intermountain Healthcare, creating one of the nation’s largest health systems and resulting in a new CEO.

Sioux Falls-based Sanford would become the east region of Utah-based Intermountain, with president and CEO Kelby Krabbenhoft becoming president emeritus after the deal is finalized, likely next summer, and Intermountain president and CEO Dr. Marc Harrison remaining to lead the organization.

The combined organization would be among the nation’s largest, with 89,000 employees, 70 hospitals, 435 clinics and more than 1 million health plan members.

Both organizations will continue to operate under their current names for the foreseeable future.

The deal makes sense both in terms of improving services clinically and financially, Krabbenhoft said.

“We’re just extremely delighted to bring the notion of Sanford Health and Intermountain Healthcare coming together in a combine we think will represent the western interior of the United States in a way that brings incredible quality to the people we serve on an even bigger scale,” he said.

The boards of both not-for-profit organizations approved a resolution to support moving forward with the due diligence process. The organizations will enter this activity with the goal to sign a merger agreement that will bring both health systems together as a model for improving access to high-value health care across the U.S. The merger is expected to close in 2021 pending federal and state approvals.

According to Becker’s Hospital Review statistics, which ranked systems nationwide last month, the combined Sanford and Intermountain would rank No. 8 based on number of hospitals.

Combined annual revenue would be about $15 billion based on 2019 numbers.

The two were introduced by former Utah Gov. Mike Leavitt, a mutual friend, and first met in April.

“We realized we shared a real common view of the future,” Krabbenhoft said. “It was one of those aha moments that suggested to both of us maybe we should be talking about something bigger.”

Based in Salt Lake City, Intermountain Healthcare is a not-for-profit system of 24 hospitals, 225 clinics, a medical group with more than 2,400 employed providers, a health insurance company called SelectHealth, and other health services in several states. Its footprint includes locations throughout Utah, Idaho and Nevada.

Intermountain’s health plan has 900,000 members; Sanford’s has 200,000 members.

Sanford has 46 hospitals, 210 clinics and 1,500 employed providers. Sanford, which also includes The Evangelical Lutheran Good Samaritan Society, has 48,000 employees compared with 41,000 at Intermountain.

Intermountain was founded in 1975 after The Church of Jesus Christ of Latter-day Saints donated 15 hospitals as a system.

Harrison, who became Intermountain’s president and CEO four years ago, is a national and international thought leader, ranked by Fortune magazine as among the World’s Top 50 Greatest Leaders last year. He ranked second among Modern Healthcare’s Most Influential Physician Executives and Leaders and tied for second on its list of the 100 Most Influential People in Healthcare in 2018.

He is a pediatric critical care physician whose executive experience includes serving as CEO of Cleveland Clinic Abu Dhabi and chief of international business development at Cleveland Clinic.

He’s also an all-American triathlete and represented the United States at the 2014 World Championships.

“In many ways, this is a match made in heaven,” Harrison said, calling both systems “economically and clinically very strong. This is not something that needs to happen. This is not a turnaround. This is something that should happen for the future of American health care.”

Harrison called the merger an opportunity to improve what he called an “industry plagued by waste” along with poor outcomes and lack of affordability.

“Put together, we think we can have that relevance and scale,” he said, adding that while the systems are geographically disparate they are culturally similar.

Intermountain and Sanford began a professional relationship about two years ago as founding members of Civica Rx, an initiative to form a generic drug manufacturer, allowing for production of generic drugs that are in short supply or highly priced.

The merger is the second Sanford has attempted in the past year. In November 2019, a proposed merger with Iowa-based UnityPoint Health was called off after UnityPoint’s board failed to approve the final vote. That would have formed an $11 billion, 76-hospital system.

In this case, Sanford and Intermountain “are almost twins in terms of their size,” Krabbenhoft said.

The difference is in the health plans, where Sanford has been challenged, he said.

“We’ve had an insurance company for 25 years and we do a good job in this region. But we’re stuck. To grow outside of this region in a mobile society has become a daunting challenge for Sanford Health. With their reach and their reputation and their insurance company being four to five times the size really was the missing ingredient. What makes this one different? It’s that. it really solves a problem for us. Beyond that it’s really two great health care organizations that don’t have crisis — no scandal, no problem, no financial issues — coming together asking what else we can do.”

Existing board of trustees from both Sanford and Intermountain will join to form a combined board. A new executive committee of the board will be created with equal representation from members of the Intermountain and Sanford Health boards. Gail Miller, current chair of the Intermountain Board, will serve as board chair for the merged organization.

“She’s an incredible businesswoman, an accomplished matriarch of her family and someone that we are just really taken with,” Krabbenhoft said. “It’s presumed in the merger that a succession for board chairs will occur with a Sanford member of the executive committee emerging as chairman to follow Gail Miller.”

Keeping the Intermountain and Sanford names retains both accepted national brands much like keeping the Good Samaritan name did after that merger, Krabbenhoft said.

The organization will be domiciled in Utah and headquartered in Salt Lake City, where Harrison is based.

Krabbenhoft, who will turn 63 soon, has publicly stated multiple times that his plan was to retire at 65. He said he had a succession plan in mind at Sanford until he met Harrison.

“I’m excited about that transition mainly because I’ve been doing this job for 40 years,” he said.

“I am completely supportive of and enthusiastic about playing a role for the next two years largely in support of Marc but also in the role of mergers and acquisitions going forward for the foreseeable future.”

The newly formed organization, with its commitment to quality and affordable care, will be looking to grow larger, Harrison said.

“We are looking for strong organizations. We want the No. 1 or No. 2 player in any given market. We want organizations that are not highly distressed, that are actually on sound footing … We think there’s going to be a natural attraction to this and we are receptive and eager to have them join the team at the right time.”

The merger positions both systems with the size, scope and resiliency to not just weather the current health care environment but thrive, Harrison added.

“We have no desire to just exist. We have a desire to lead,” he said. “This merger is the next phase of being a forever organization.”