Minnesota health officials says hospital mergers often lead to higher patient costs

MINNEAPOLIS (FOX 9) - Minnesota's top health economist told a state Senate committee Thursday that hospital mergers often lead to higher costs for patients, with post-merger costs spiking as much as 20% in some cases.

The wave of mergers

What we know:

Three large health system mergers have been proposed in Minnesota in the past year alone. North Memorial Health finalized a merger with South Dakota-based Sanford earlier this month. 

Minnesota-based Allina Health is also set to join California-based Sutter, though Minnesota Attorney General Keith Ellison has yet to approve that deal. And just this week, HealthPartners and Essentia Health announced their boards of directors have approved an agreement to combine their organizations.

The proposed HealthPartners-Essentia merger would create one of the largest nonprofit healthcare systems in the upper Midwest, according to a news release. 

The combined organization, which will keep the HealthPartners name, would include 22 hospitals, more than 35 clinics and 6,000 clinicians across Minnesota, North Dakota and Wisconsin. Essentia facilities will keep the Essentia Health name while operations are integrated, the news release said.

What the merger means for patients

Dig deeper:

HealthPartners and Essentia said patients and members should not experience any changes or interruption to their care or coverage as a result of the merger.

The two organizations cited rising healthcare costs as a reason for combining, saying the merger allows them to better innovate, improve affordability and result in more choices for patients and better coordination of care.

Current HealthPartners President and CEO Andrea Walsh will lead the new organization, while Essentia CEO David Herman will serve as president of combined clinical care group operations, according to the news release.

"This combination is about doing more for the people and communities who count on us," Walsh said in a statement. "HealthPartners and Essentia Health share a belief that everyone deserves access to high-quality care and coverage, close to home and centered on their needs. Together, we can build on the strengths of both organizations to improve health, expand access and create a stronger future for the communities we serve."

In his own statement, Herman added: "Our organizations share similar missions and values, deep roots in this region and a focus on improving health and well-being. As a combined nonprofit health system, we will be able to better innovate and grow our workforce. 

That strong foundation will make us even better partners for our patients, working together to help people live their healthiest lives, wherever they call home."

What experts and lawmakers are saying

What they're saying:

On Thursday, Minnesota Department of Health economist Stefen Glidemeister told a state Senate committee that consolidation often leads to higher prices for patients — with costs spiking as much as 20% in some cases after a merger.

"We want competition because we think it makes healthcare delivery stronger," said Glidemeister.

He also pointed to a broad body of research backing up those concerns.

"So many studies out there. Across jurisdictions. Across types of mergers," Glidemeister said.

And when it comes to the quality of care, the picture isn't any clearer. "There's no clear evidence that consolidation improves quality," he said.

Company CEOs, however, say consolidating brings financial stability and prevents clinics from closing in rural communities. Walsh told reporters Tuesday that the pressures driving these decisions are real.

"I think Minnesota, similar to communities across the country, are really at a turning point," Walsh said. "We see workforce shortages growing and access is uneven."

Essentia CEO David Herman echoed those concerns on a call with reporters, noting that new Medicaid requirements mean hospitals are bracing for a potential influx in uninsured patients, and that Medicare reimbursements have been a challenge.

"There are challenges in reimbursement. There are challenges as the cost of care goes up," said Herman. "But if you can be more efficient, more effective, and keep people healthier, that certainly helps address it."

Some rural lawmakers share those concerns about access. "If we didn't have some of these mergers and consolidations we would have lost providers," State Sen. Paul Utke, R-Park Rapids said during Thursday's committee hearing. 

Spokesperson from HealthPartners shared the following statement with FOX 9: 

"Our combination with Essentia Health is focused on creating a more integrated model that connects care, coverage, specialty expertise and rural health services. We believe that kind of integration creates opportunities to reduce complexity and improve affordability in ways that would be harder to achieve independently." 

Allina Health sent this statement: 

"After losing $1 billion dollars over the last five years, joining Sutter Health is an urgently needed, proactive solution that will strengthen Allina Health for the long term. As nonprofit health systems serving distinct geographies, Allina Health and Sutter Health are not competitors in the same market. We are coming together around a shared nonprofit mission to strengthen access, affordability and long-term sustainability for Minnesota and western Wisconsin. This is about building on Minnesota’s healthcare legacy while ensuring its future.

"We agree that affordability is an important issue facing patients and families. In the past four years, Sutter Health has a strong track record of meaningfully improving patient access to excellent care in California. Together, we will build on Sutter's experience and Allina Health's strong foundation, investing more than $2 billion in Minnesota and western Wisconsin to expand access to lower-cost ambulatory and specialty care, recruit more physicians, shorten wait times and improve digital access. Delivering high-quality care in the right place and at the right time is at the core of making care more affordable."

What workers are saying

What they're saying:

A coalition of healthcare unions — including SEIU Healthcare MN & IA, AFSCME Council 65, the Minnesota Nurses Association and OPEIU Local 12 — released a statement Tuesday raising concerns about what the merger could mean for workers and communities.

"Today's news feels a bit like Groundhog Day, with Minnesota healthcare workers and community members facing the fear of what could come from the latest potential healthcare consolidation," the statement read in part.

The coalition said they are worried about cuts to jobs and services. The CEOs said, as of now, they do not plan to close any clinics.

What's next:

The MDH and the attorney general's office must approve mergers before they can go through. Ellison said his office will investigate the impact on affordability and is asking for public input.

"We'll evaluate if there are any anti-competition elements to this," said Ellison. "We'll also evaluate, as we have to under the statute, if this will be in the best public interest."

If the HealthPartners-Essentia merger is approved, the two organizations said they'll begin operating as a single organization effective Jan. 1, 2027.

What we don't know:

It remains unclear whether the Allina-Sutter merger will receive approval from Attorney General Ellison, and what the full impact of all three proposed mergers will be on patient costs and care quality across the state.

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