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Becker’s Healthcare Podcast
Sutter Health’s Major Merger Plans and AdventHealth’s Financial Strength with Alan Condon
00:10:00
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- [00:00]
A
This is Scott Becker with the Becker Healthcare podcast. I'm thrilled today to be visiting with Alan Content, Ellen's editor in chief at Becker's Healthcare, a tremendous leader. We are talking on St Patrick's Day. He just expressed that he can't wait to get back to Ireland for the World cup that the match he's going to see in Ireland and he'll be cheering for the Irish national team, I take it. But we're not going to talk about that today. We're going to talk about health care today though, if you want, we could talk about St. Patrick's Day and the Irish national team too. And Alan, take a moment and tell us a little bit about what you're watching in healthcare right now. And thank you for joining us.
- [00:39]
B
Yeah, always a pleasure. Maybe we'll do a separate podcast another day, Scott, on the Irish laptop here. But some big, big healthcare finance news. Really excited to kind of hop on and talk through a couple key stories today. So I think first and foremost this is a huge, huge story just kind of just announced this afternoon and that's Sutter Health of course, fantastic health system headquartered in California signed a letter of intent to pursue a merger with Alina Health headquarters in Minnesota. So this, this deal, sign a letter of intent is essentially going through the exploratory phase here. Would essentially create a 40 hospital nonprofit health system that would span California, Minnesota. Alina also serves caters to a lot of patients in Wisconsin as well. So would really bring together two really large regional systems under the Sutter Health brand with a line of health essentially operating as Sutter Health's upper Midwest division. So again this is a very, very early stages but a really exciting deal. They create that large multi state system. I think in terms of the leadership structure and how this would be formatted. Alliance Health CEO Lisa Shannon will continue to lead the health system or that division of while Warner Thomas, fantastic leader of Sutter Health, he would remain presidency of Sutter Health and lead the combined 40 hospital health system. I think a huge, huge investment is going to be undertaken here should this get over the line. The health systems plan to invest more than $2 billion into Minnesota, into western Wisconsin. And that investment would essentially focus on expanding ambulatory care sites, growing specialty services and really improving access to care in the Midwest division. AI and digital health unsurprisingly are going to be central to this strategy. Sutter Health is a very tech forward, really impressive health system in California. So I think leaders have said that the combined health system will really look to leverage Sutter Health technology ecosystem and Minnesota's med tech expertise to really advance AI and digital tools. So some of those key priorities would really focus on reducing administrative cost burdens, improving scheduling, really helping out, enhancing patients and clinician experience across the combined system as well. So huge, huge deal and I think again very, very early doors just, just announced and there's a lot to go in terms of the due diligence phase, the regulatory issues to pass through. But it is interesting when you think about where, where, where sort of health is headquartered of course in California. Jumping over to the Midwest, taking a leaf out of some similar health systems which you've seen Prime Healthcare also headquartered in California, they've expanded into Illinois for the first time last year with those acquisition of the Ascension facilities recently acquired a health system in Maine. So certainly a really interesting deal, lot to come on this but just really, really fascinating to see what comes with this one down the line.
- [03:41]
A
No, that's absolutely fantastic and amazing to see sort of that the mindset because in the old days people did these mergers. They would do it with another local system to get more market share, to have more market alignment in an area. These are very different markets. Some of the thoughts around that. Alan, any, any thoughts on what drives this merger? Obviously there'll be a bigger overall system but it won't help them in specific market negotiations, the payers or specific market presence. But will the 2 +2 1 +1 strengthen each other? How do you think about that? Or look that it's more like some of the advocate mergers where the North Carolina atrium merged with the midwestern advocate system to create a larger system but not necessarily in the same neighborhoods. Any thoughts here on this, on this merger?
- [04:30]
B
Yeah, it is fascinating. I think essentially the jury is still kind of out on how these types of non contiguous, non adjacent mergers work. I mean we've seen the likes of advocate merger across six states. We're kind of all kind of adjacent to one another. But I think there is such a big interesting dynamic in terms of the economies of scale that comes with it. But no doubt you're jumping in a completely different payer environment, completely different cultural mix of two systems. No doubt there's a lot of due diligence that goes into these deals especially with the leadership of Sutter aligned A two fantastic systems but definitely come with unique challenges I would say than maybe acquiring another health system within your state or even maybe one market or one market or two markets over. But unique challenges no doubt that come with these, you know, happen from one, from one part of the country to the next. So it'd be interesting to see if we take and I've heard off the record from from conversations with other CEOs and other CFOs recently, not to kind of name any names, but this is certainly seems to be more in the in the mindset, more in the thinking of some of these regional systems are considering now more than ever. Kind of does a deal make sense if we jump two, three states over? Of course there's a lot of due diligence that needs to go into these deals, but seems like are we going to see more folks take a leaf out of the playbook here. Prime Healthcare of Sutter Health of Alina. Certainly interesting to keep a close eye on these and see how these deals turn out, but certainly a lot of questions still to be answered, no?
- [06:04]
A
Absolutely fascinating. Tell me, are there other stories you're watching closely currently?
- [06:09]
B
Yeah, absolutely. I think I'd love to focus just one bit down on Advent Health. So talking about scale I think is a nice segue into Advent Health. Just fantastic leadership here, but just kind of honing in on their finances. So recently reported their full year results for 2025. We kind of covered the spectrum of the for profit systems quite recently. But Advent Health of course huge fate. Faith based system headquartered in Florida operates I believe just short of 60 hospitals across nine states. So huge kind of regional national system here. A really, really impressive financial results for 2025 just like what they reported in the year previously. So came out of the year with an operating income of $2.7 billion, up from about $2.3 billion in 2024. And its operating margin really coming in at an impressive 11.6% the same operating margin that reported the previous year. So I think revenue for Advent health grew by $3 billion year over year. Now a $23 billion system, expenses rose by 16% year over year. But importantly revenue match that growth also growing by 16% year over year. So margins really holding steady there. I think Advent Health is no doubt done scaled up without that margin erosion essentially growing fast and high growth markets but also controlling costs as well to protect its profitability. And I think a few things really tie into that. Net patient revenue increased by $3 billion year over year suggesting ADV Health higher volumes no doubt coming into the system, improved payer mix and or potential rate increases in some of its core markets. What I think has really been honing in and expanding in higher margin higher acuity service lines, the likes of spine orthopedics, GI cardiology, all key here and then just just honing in on its on its home state in Florida. It's had a ton of growth here recently. We've reported over the last couple of years. It recently acquired a hospital from Community Health Systems in Florida. It's also building a new 80 bed hospital here. But one key part of its growth is really building and expanding multiple markets with freestanding emergency departments across Florida. Across multiple markets, but particularly in Florida, I believe IT now is 27 freestanding emergency departments in Florida alone. Really continues to expand in high growth, attractive markets here. And the last just quick note on this. I think see a lot more health systems kind of really, really look to that freestanding emergency department as a way to essentially plant a flag, I guess for lack of a better term in new markets or new territories. Expanding outpatient and then building surrounding facilities around that. I think the idea being can we get more of these patients, bring them into the health system earlier in their care journey through freestanding EDs, urgent care centers, outpatient facilities and then for that more complex high acuity, high margin care, can we bring them back into the inpatient setting as well? So fantastic financial results by Advan Health and just a ton of growth there really, particularly in the Florida market.
- [09:27]
A
No fantastic. And Advent Health has been one of the great success stories over the last decade. Really remarkable what they have accomplished. I know they've got new great CEO leadership after Terry Shaw who led it for a long time was a fantastic leader and just doing a wonderful, wonderful job. Ewan, I want to thank you as always for joining us on the Becker's Healthcare podcast. You are not just great on the podcast but a fantastic leader in person. Thank you so much for joining us today.
- [09:53]
B
Always a pleasure. Talk so much Scott. Really appreciate it.