BJC HealthCare and Saint Luke’s Health System Merge
BJC HealthCare, the largest healthcare system and employer in the St. Louis region, and Kansas City-based Saint Luke’s Health System, the No. 2 health system in the Kansas City area, have finalized an agreement to merge the two systems by January 1. The merger will create a healthcare giant in the state, with $10 billion in revenue, 28 hospitals, and hundreds of clinics across Missouri and stretching into Illinois and Kansas.
A New Era of Healthcare in the Midwest
Richard Liekweg, BJC President and CEO, who will serve as CEO of the integrated health system, said in a statement, “This is an exciting day for the future of healthcare in the Midwest.” Julie Quirin, who was promoted to president of St. Luke’s in October, will lead the health system in Kansas City, replacing CEO Melinda Estes, who is retiring at the end of the year.
Regulatory Approvals and Industry Consolidation
BJC stated that it has met all regulatory approvals and completed the Federal Trade Commission’s review process. The move is part of the continued consolidation of the healthcare industry, with both providers and health insurers pursuing mergers in an effort to gain more leverage when negotiating insurance coverage deals. Although the FTC and Department of Justice have blocked hospital mergers within geographic markets, they have not taken action against mergers that combine systems in separate markets.
Impact on Healthcare Costs
Deals like the BJC and Saint Luke’s combination are becoming more common and contribute to healthcare cost increases. When mergers occur in the same state, the combined systems often deal with the same health insurance plans, which operate across states. Insurers then have more incentive to agree to hospital price demands to keep the larger, cross-city networks within their plans. These price increases ultimately show up in the premiums all workers pay for health insurance. BJC has declined to comment on the price impact of the merger but has pointed to hospital industry arguments that the cost savings hospitals manage to wring from merger efficiencies are pocketed by insurers.
Collaboration and Pandemic Recovery
BJC and Saint Luke’s, both tax-exempt nonprofits, have already been working together for over a decade in the BJC Collaborative, which facilitates cost savings through group purchasing. The merger follows several difficult years for hospitals wrought by the pandemic, though both systems have seen their operating margins return to the black. Through September, BJC reported operating income of $113 million, while Saint Luke’s reported an operating income of $8.4 million through the third quarter.
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