Dive Brief:
- Allina Health has signed a letter of intent to join Sutter Health to create a combined $26 billion nonprofit health system.
- If finalized, the acquisition would expand Sutter’s presence outside of California, where it’s headquartered, and into Minnesota and Wisconsin. Minneapolis-based Allina Health will become the “Upper Midwest Division” of Sutter, according to a Tuesday press release.
- The combined system would include 39 hospitals, 18,000 physicians and more than 400 care sites. Sutter and Allina expect to close the merger by the end of the year if the deal is approved by regulators, the health systems said.
Dive Insight:
The letter of intent is the first step for the acquisition. The health systems said they’ll complete due diligence and hammer out final terms in the coming weeks and months before signing a binding definitive agreement.
The deal would expand Sutter outside of its home state. The hospital system, which is headquartered in Sacramento but has a presence throughout the San Francisco Bay Area, said access to AI and platform development in California and leading hubs of medtech and engineering in Minnesota would advance its digital and technological initiatives.
At the J.P. Morgan Healthcare Conference in January, Sutter said it wanted to pursue “noncontiguous growth opportunities” to expand its reach and attract new partners. That same month, the health system hired Scott Norlund to oversee partnerships and M&A outside of California.
The new system would have a combined total revenue of $26 billion per year based on 2025 figures from Sutter and Allina. The lion’s share of combined revenue comes from Sutter, which generated $19.8 billion in revenue last year.
Sutter’s and CEO Warner Thomas will continue to lead the combined organization. Allina’s CEO Lisa Shannon will head Sutter’s upper midwest division, the company said Tuesday.
Health systems have been increasing cross-market acquisitions, according to research. More than half of hospital mergers between 2010 and 2019 were cross-market, according to a 2022 study published in Health Affairs.
Cross-market deals may be subject to less regulatory scrutiny than acquisitions of companies that compete in the same market. They may also give health systems more leverage in contract negotiations with insurers, according to the study.
