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Colorado OKs SCL Health megamerger, creating one of the largest nonprofit health systems in the West

The Broomfield-based health system’s merger with Utah-based Intermountain Healthcare will create a 33-hospital, 58,000-employee chain

Saint Joseph Hospital in Denver, photographed on Oct. 22, 2019. (John Ingold, The Colorado Sun)
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Colorado-based SCL Health, which operates eight hospitals and dozens of clinics across three states, cleared the last hurdle on Thursday in its plan to merge with Utah-based Intermountain Healthcare to create one of the largest nonprofit health systems in the Western U.S.

After a review, the Colorado Attorney General’s Office issued an opinion allowing the merger to proceed, finding that the merger would not violate Colorado law. That review was limited, though, because Colorado’s Hospital Transfer Act constrains what the attorney general’s office can look at when reviewing mergers by nonprofits, which both SCL and Intermountain are.

Ultimately, the review found that the deal would meet the two requirements for nonprofit mergers: It would not change the charitable purpose of SCL Health and it would also not cause a “material amount of hospital assets” to leave the state.

But the constraints of the review mean that the attorney general’s office did not evaluate whether the merger will raise prices at SCL’s hospitals in Colorado — something past research on hospital mergers shows is a potential concern.

“We will monitor SCL Health’s hospitals in Colorado over the next five years to safeguard that their charitable purposes are maintained and Colorado communities continue to be served,” Chief Deputy Attorney General Natalie Hanlon Leh said in a statement.

Hanlon Leh oversaw the review after Attorney General Phil Weiser recused himself, citing a potential conflict of interest. Weiser’s wife is a doctor who works for SCL Health.

A sign on the exterior of Saint Joseph Hospital in Denver, which is one of the flagship hospitals in the SCL Health system. Photographed on Oct. 22, 2019. (John Ingold, The Colorado Sun)

SCL, which was founded in Kansas before moving its headquarters to Broomfield, has about 16,000 employees and owns four hospitals in Colorado, including Saint Joseph Hospital in Denver, Good Samaritan Medical Center in Lafayette, Lutheran Medical Center in Wheat Ridge, and St. Mary’s Medical Center in Grand Junction. SCL also has an affiliation agreement to operate Platte Valley Medical Center in Brighton, though Platte Valley’s ownership will not change hands as a result of the merger.

Intermountain is considerably bigger. It has about 42,000 employees and operates 25 hospitals, along with a number of clinics, in Utah, Idaho and Nevada.

Intermountain will take the lead in the merged organization, which will operate under the Intermountain Healthcare banner, and its current CEO will retain that role and title. SCL’s hospitals will retain their names, as well as a degree of local oversight through their community boards. The attorney general’s office said it believes the hospitals “will effectively operate the same as they had pre-merger” and said the two health systems had agreed “there will be no material layoffs or downsizing.”

On Thursday, though, the head of the state’s Medicaid department raised questions about what impacts the merger will have on SCL’s prices and investments.

Kim Bimestefer, the executive director of the state Department of Health Care Policy and Financing, said SCL currently has about $3.1 billion in reserves, according to research of public filings by her department. Intermountain, she noted, has as much as $10 billion in reserves.

Kim Bimestefer (Handout)

Speaking during a virtual policy summit hosted by state health leaders, Bimestefer questioned whether some of SCL’s earnings and reserves will now start benefiting entities outside of the state.

“This is incredibly important,” she said. “Where do the earnings go? Where do the reserves go?”

She also raised concerns about the impact on prices at the SCL hospitals in Colorado.

A 2020 report by the Rand Corp., a nonpartisan think tank, looked at how much hospitals across the country charge privately insured patients relative to how much Medicare pays for the same services at those hospitals. The report found that SCL’s hospitals charge patients 187% of Medicare prices, on average. That was below the national average of 247%. The report found that Intermountain’s prices were 271% of Medicare’s.

A large body of research shows that hospital consolidation often leads to higher hospital prices, and Colorado’s hospital market has already seen a lot of mergers and acquisitions. Bimestefer said Thursday that 26 hospitals in the state were part of a hospital system in 2009. Now, there are 46.

A 2020 report on Colorado hospital consolidation by the Center for Economic and Policy Research found that consolidation “is likely the biggest driver of prices and operating margins in Colorado’s Front Range counties.”

“The clearest reason why this consolidation is happening is that hospitals want market power in order to command higher prices for their services,” the report stated.

The merger is set to become official on Friday. SCL and Intermountain are expected to comment more once they have merged operations next week.


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