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LVHN and Thomas Jefferson University Hospitals plan to merge

Lehigh Valley Hospital - Cedar Crest
Donna Fisher
For LehighValleyNews.com
Lehigh Valley Health Network main campus in Salisbury Township.

SALISBURY TWP., Pa. — Lehigh Valley Health Network announced plans to merge with Philadelphia-based Thomas Jefferson University Hospitals, a partnership that if approved would result in a health care behemoth with 30 hospitals and more than 700 outpatient care sites.

"Today, Jefferson and Lehigh Valley Health Network (LVHN) announced they have signed a non-binding letter of intent to create a leading integrated care delivery system, including a national research university and an expanded not-for-profit health plan," LVHN said Tuesday in a written release.

President and CEO Dr. Brian Nester said a key motivation behind the merger for LVHN is an insurance program that Jefferson already has.

“We believe by having access to that, with the first premium dollar working with those assets at Jefferson Health Plans, we will be able to deliver more access, better care, deeper services, and ultimately reduce costs and improve outcomes,” Nester said in an interview.

“Having that health plan will be kind of mechanism and juice that will bring us together and really get us to the next generation of health care delivery systems.”

Jefferson Health Plans offers Medicaid, Medicare and children's health insurance programs.

Health care costs, quality of care

Based in Salisbury Township, LVHN has 20,000 employees, 13 hospital campuses and numerous other care sites, according to its website.

It's the Lehigh Valley's largest employer, according to the state Department of Labor and Industry.

Zachary Levinson is a project director at KFF, formerly known as Kaiser Family Foundation. His team has done extensive research on health systems and hospital mergers and acquisitions, and he weighed in on the situation playing out in the Lehigh Valley.

"I think that there are tradeoffs involved, so on the one hand, you could imagine that when two hospitals or health systems merge that there's some types of efficiencies," he said. "They're, for example, able to purchase supplies in bulk at a at a cheaper at a greater discount, they're able to better coordinate care across different providers, and that could all potentially benefit patients."

He said there is a substantial body of research showing that consolidation tends to lead to higher prices, without evidence that there are increases in the quality of patient care.

"When hospitals and health systems merge it also reduces competition and that means that there's less competitive pressure on these hospitals systems to lower the prices that they're offering to invest in quality of care in order to track patients," Levinson said.

Nester respond to inquiries about the possibility of higher patient costs by saying, “I don't think we're going to seeing increasing costs, I don't. I think our competency that we're trying to build by merging that clinical delivery system with the insurance mechanism is all about value, highest possible quality, lowest possible cost.”

Nester said although the health network has been consolidating services in areas that may save money, he said jobs are not at stake right now.

“ I don't see a reason for them to be worried about our jobs," he said of employees. "Now, we've been looking for efficiencies, we've been taking out redundant costs, we've been taking out waste out of the system. In the last six years, we've taken over $500 million out of the system and we've done most of that without touching lives. Every last colleague is precious to us.”

Timeline: 'Many month process'

As far a timeline, Nester said a definitive agreement needs to be reached. Paperwork will most likely be submitted to the Federal Trade Commission in January, he said, then to the Pennsylvania Attorney General's Office and the Governor’s Office before getting approval for the merger.

Nester said he hopes it will go through within a year, but adds it’s a “many month process.”

He concluded by saying he believes there is value in merging the Jefferson and Lehigh Valley Health Network names, but nothing has been decided yet.

In September, LVHN announced an affiliation with Children's Hospital of Philadelphia.

Thomas Jefferson University Hospitals employs more than 42,000 people, maintains a highly-regarded medical school and calls itself Philadelphia's second-largest employer.

Jefferson CEO Dr. Joseph G. Cacchione said the health care landscape and communities’ needs are changing.

"It is critical leading systems evolve and make investments in the future of care and wellness — growing and protecting access to enhanced, affordable, high-quality and innovative care, particularly for historically under-served patients,” he said.

Lawmakers weigh in

In Allentown, state Rep. Peter Schweyer, D-Lehigh, said word of a partnership has many wondering about the effect on the workforce.

"...I understand that consolidations can be worrisome to neighborhoods, patients, and employees. But, when done right, mergers can mean quality patient care remains, jobs are not lost, and communities see economic development and investment," Schweyer said.

State Rep. Mike Schlossberg also expressed concern for both patient care and LVHN's jobs.

"Further consolidation within the health care industry is a real concern. With fewer and fewer alternatives to massive health care networks, I am deeply concerned about patient choices and the ongoing rising costs associated with delivery of care," he said.

"Jefferson has a difficult challenge in using its stellar reputation to match the decades of good-will borne by LVHN’s homegrown care."

As for employees, Schlossberg noted LVHN has an enormous effect on the local economy.

"Health care and social assistance accounts for approximately 23% of the county’s employment base and provides family sustaining wage opportunities for approximately 46,000 people. Health care, and health care systems, are huge economic engines in our region," he said.

'Prestige level' impact

Don Cunningham, president of the Lehigh Valley Economic Development Corp., expressed confidence the emerging network would continue its critical roles of providing high quality care and being a major employer.

The region's growing population demands a high number of medical workers, so he didn't anticipate widespread cuts coming with the merger.

Instead, Cunningham believed the deal may improve the Lehigh Valley's ability to attract talent to the region. Having large hospital networks in the region has appealed to young professionals and the businesses that want to hire them, he said. By merging with a larger health network, LVHN may be able to offer its patients better access to specialized care for illnesses such as cancer often found in large urban hospital networks, he said.

"The hope would be this would strengthen both the prestige level and the quality level of care for the Lehigh Valley," Cunningham said.

According to the joint statement, LVHN and Jefferson Health expect to sign a definitive agreement and close the transaction in 2024, upon completion of regulatory approvals.

In the meantime, both Jefferson and LVHN will continue to operate as separate, independent entities.

If the transaction is completed, Jefferson’s Cacchione will continue to serve as chief executive officer of the Jefferson enterprise. LVHN's Nester will serve as executive vice president/chief operating officer and president of the legacy Lehigh Valley Health Network, reporting directly to Cacchione, according to the statement.

County leaders react

Lehigh County Executive Phil Armstrong was giving away toys at the Salvation Army in Allentown on Tuesday when a reporter told him about the merger. County government frequently partners with the health network for human services, and he said he hoped their strong working relationship would continue if the merger goes through.

Both LVHN and St. Luke's University Health Network have been rapidly expanding in recent years, making health care more accessible and growing the local workforce across the region.

"They're neighborhood hospitals now," Armstrong said. "They've been opening on basically every corner. I hope they continue that."

Across the county line, Northampton County Executive Lamont McClure was optimistic about the news. Health care employers, including Northampton County, have struggled to maintain staffing due to a shortage of workers. While acknowledging the new entity will need to maintain its quality of care and keep prices affordable, Jefferson's medical school would be a welcome addition to the Valley, he said.

"That's going to be good for the whole of society because we're going to get new aides, new LPNs, new RNs," McClure said. "It is a national crisis, a local crisis, and nobody's talking about it."