PHILADELPHIA (CBS) — Executives at Jefferson and Einstein Healthcare networks have put their urge to merge in writing, by signing a non-binding Letter of Intent to do so. They maintain that Jefferson’s larger size will benefit patients, medicine and academics.
The step would create the second largest health-care network in Philadelphia.
“Together we would be able to better meet the needs of our patients,” said Barry Freedman, CEO of the Einstein Healthcare Network. “This merger would enhance both our abilities to care for the populations in the greater Philadelphia area.”
Thomas Jefferson University and Jefferson Health President and CEO Steve Klasko says bigger is an advantage going forward, to “provide better quality, greater access and lower costs” to patients. He says the idea is to “fundamentally transform how healthcare is delivered.”
“I guarantee you that Amazon, Berkshire Hathaway and JPMorgan are interested in how we’re going to innovate health care,” Klasko said.
The well known CEOs of those corporate behemoths are forming an independent health care company, with the goal of providing high-quality health care for their employees.
It’s part of a growing trend to consolidate health systems to spread increased costs over a wider patient base and gain more leverage to negotiate with insurance companies, that are now reimbursing for quality of care instead of quantity.
Klasko pointed out in a side interview that “if health care doesn’t change in the next ten years,” then they’ve “adopted the wrong strategy.”
“I was doing something with Apple back when Gateway and Dell were still building computers, and Apple was building iPods,” he said. “We believe that health care will transform.”
The goal is to get to a definitive agreement in the coming months.
Among the challenges in Philadelphia, which is the poorest big city in the country, is a large number of Medicaid and uninsured patients. It’s costly for hospitals and patient care suffers, whether that’s remedied with consolidations is yet to be determined, but it’s a goal.
“Philadelphia has one of the greatest discrepancies in life expectancy in the country based on your zip code,” said Klasko. “What this is all about is that five years from now because of Einstein Jefferson merger, I don’t want the headline in The New York Times to be in Philadelphia, your zip code is more important than your genetic code.”
Traditionally, mergers lead to layoffs, but there was no official comment about that. However, there were layoffs at Kennedy when it joined forces with Jefferson.
The process is just starting with the Einstein deal and it could be months before it’s finalized. Right now, nothing changes for patients.
Once both organizations complete due diligence, and if regulators approve, it would be Jefferson’s sixth acquisition of health systems, hospitals, and a school – Philadelphia University – under Steve Klasko, since 2013.