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September 5, 2017

Carolinas HealthCare System, UNC Health Care announce intent to merge

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Read Advisory Board's take on this story.

Carolinas HealthCare System, the largest health system in North Carolina, and UNC Health Care, the state's renowned academic health system, on Thursday announced plans to merge into one of the nation's largest not-for-profit health systems.

Both health systems have signed a letter of intent entering them into exclusive negotiations to combine their clinical, medical education, and research resources. They intend to enter final agreements, which would be subject to regulatory approval, by the end of the year.

About the merger

The combined organization would employ about 100,000 employees, including 3,936 physicians, and according to a Carolinas spokesperson would have about $14.4 billion in annual revenue. According to Axios, the combined company would be one of the 15 largest U.S. health systems by revenue.

Eugene Woods, president and CEO of the 47-hospital Carolinas HealthCare System, would become CEO of the combined company, and William Roper, CEO of the 12-hospital UNC Health Care and dean of UNC School of Medicine, would become the company's executive chair. Officials have not released the name of the combined company or the location of its headquarters.

"Since our organizations already serve almost 50 percent of all patients who visit rural hospitals in our state, we are perfectly positioned to participate in the reinvention of rural health care in partnership with others," Woods said in the news release.

According to Healthcare Finance, the combined health systems would focus on four strategic areas: advancing clinical care expertise, strengthening the region's economy, growing the academic enterprise by recruiting new physicians, and increasing access and affordability.

The combined health system also would work to advance cancer treatment, Modern Healthcare reports. Carolinas treats more than 10,000 cancer patients annually at its Levine Cancer Institute, and UNC is a National Cancer Institute-designated cancer center and receives more than $70 million in federal research grants.

Both organizations said they do not expect any antitrust issues and said competition will remain strong in the state.

North Carolina Attorney General Josh Stein's (D) office declined to comment on the proposed merger but said the office "will be reviewing it closely to ensure that it benefits consumers" (Livingston, Modern Healthcare, 8/31; Monegain, Healthcare Finance, 8/31; Paavola, Becker's Hospital Review, 9/1; Alexander et al., Charlotte Observer, 8/31; Herman, Axios, 8/31).

Advisory Board's take

We've seen an increase in provider consolidations across the industry, and organizations in the midst of M&A must create a strategy for the EHR and other technology assets early in the process.

Seamless technology integrations don't happen overnight, but I typically advise our members to invest quickly in EHR standardization and data integration. In some cases that means incorporating a health information exchange (HIE) or other smaller, immediate, or temporary interfaces.

While the EHR is just one piece of the puzzle when it comes to a merger, it must be a priority, as it can often have an outsized influence on culture, productivity, and adoption of the new corporate identity. In fact, the urgency of a merger can also speed up an EHRs transition by cutting the length of time typically committed to committee work and system build, particularly when the acquiring organization opts to transition the purchased organization to its EHR.

Regardless of the approach taken, organizations should not miss the opportunity to use mergers as a catalyst for change. To learn more, check out our infographic on the EHR life cycle.

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