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Essentia Health pulls out of merger with Marshfield Clinic over poor finances

by John R. Fischer, Senior Reporter | January 10, 2024
Business Affairs
Essentia Health and Marshfield Clinic have called off their merger. (Photo courtesy of Essentia Health)
Financial challenges plaguing Marshfield Clinic have led it and Essentia Health to abandon their plans to merge, ending two years of discussions and planning.

Since October 2022, the Wisconsin healthcare organizations were reported to be in talks to combine, with both confirming the news in July 2023, saying they would become an integrated, regional health system, serving patients in Wisconsin, Minnesota, Michigan, and North Dakota. The combined organization would have had 3,800 providers at over 150 care sites, including 25 hospitals.

But on January 5, the two announced that the deal was off, with Essentia attributing Marshfield Clinic’s financial state as the primary reason, according to the Star Tribune. Marshfield previously reported, in its Q3 earnings report, an operating loss of $133.5 million, up from $92.6 million the year before.

In November, it announced that rising supply and labor costs and low reimbursement from Medicaid and Medicare had forced it to initiate major pay cuts for upper-level management, including the CEO, and suspend its 401K match program for all employees, and its 2023 contributions to the employee retirement plan and 457 compensation plan. It also laid off 3% of its employees in March of last year, reported WQOW News 18.

"To be clear, Essentia's finances are strong, and it is imperative we maintain that stability so we can continue investing in and enhancing care for our patients," said Essentia in its statement.

Founded in 2004 via a partnership between the Benedictine Health System and the SMDC Health System, Essentia is based in Duluth and serves patients in Minnesota, North Dakota, and Wisconsin. It has 15,000 employees, including over 2,000 physicians and advanced practitioners, and has many Catholic facilities, as well as 14 hospitals, 77 clinics, six long-term care facilities, six ambulance services, 24 retail pharmacies, and one research institute.

Recently, it completed construction on a $915 million hospital tower and clinic space, the largest private investment in Duluth’s history. It also plans to tear down its former hospital, making room potentially for a new University of Minnesota Medical School building, reported the Star Tribune.

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