Essentia Health ends merger talks with Marshfield Clinic

Minnesota-based Essentia Health has ended its merger talks with Marshfield Clinic, saying Marshfield’s ongoing financial woes prompted the Minnesota health care giant to nix the planned union.

While a joint press release sugarcoated the demise of the merger, an Essentia spokesperson said in a separate statement to multiple media outlets that Marshfield’s financial health “was the primary factor in our decision to end discussions.” 

“Financial stability is a critical component of Essentia being able to fulfill our mission for our patients and communities,” the Essentia statement said, as reported by multiple media. “We appreciate the incredible contributions of our colleagues, whose hard work ensures we are a growing organization that provides excellent, accessible care to our communities. 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.”

The two health care systems had announced merger talks in October 2022. In July they announced the signing of an integration agreement.

But Marshfield’s ongoing perilous financial condition ultimately doomed the marriage.

In November, as The Lakeland Times has previously reported, Marshfield announced what it called a temporary pay and benefits cut for employees, including executive staff. The pay cuts came after the company engaged in layoffs earlier last year. 

According to a company announcement, executive staff and the Marshfield CEO would take a 15 percent pay reduction. Directors pay was cut by 10 percent, and the system suspended all company-match contributions to employee retirement accounts.

Marshfield also suffered major downturns in fiscal year 2022, its operations bleeding into the red by nearly $368 million, its cash on hand plummeting by more than 25 percent over the previous year, and its income levels falling below the minimum required by a debt service covenant.

The bleeding continued into 2023, as the system reported a 4.2 percent first quarter operating margin loss of $32.6 million. That ranked the System just 26th out of 30 large ranked hospital systems in the country.

Despite its own assertions that its finances were strong, Becker’s Hospital Review reported this week that Essentia barely broke even in fiscal 2023.

Both parties tried to put a brave face on things in their joint release.

“We have decided that a combination at this time is not the right path forward for our respective organizations, colleagues and patients,” the news release stated. “We will continue to seek opportunities for collaboration as two mission-driven, integrated health systems dedicated to sustainable rural health care. Our organizations have great respect for one another, and we each remain committed to strengthening the health of our communities as we deliver high-quality, compassionate patient care.”

Marshfield interim CEO Dr. Brian Hoerneman said both systems were high-performing, well-respected, community-focused organizations. 

“Those similarities served as the basis for efforts toward a combination,” Hoerneman said. “As we now move our separate ways, Marshfield Clinic looks forward to advancing our 100-year legacy of providing compassionate and accessible care to the communities we serve. Our commitment to continually enhance the level of care we provide remains firmly in place as we look to the future.”

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.