Presbyterian Healthcare Services deal with Iowa-based UnityPoint Health falls through

A proposed merger between Presbyterian Healthcare Services and Iowa-based UnityPoint Health is no longer happening, Presbyterian CEO Dale Maxwell told the Journal.

The merger, first announced in March and aimed at consolidating administrative functions and easing cost burdens, fell apart earlier this week for undisclosed reasons. It would have created a massive health care conglomerate valued at $11 billion.

Maxwell wouldn’t specify why the deal fell through, adding that Presbyterian is open to other options going forward.

“We’re just dealing with what’s in front of us,” Maxwell said. “We have to continue moving forward and finding these efficiencies to stabilize health care well into the future.”

UnityPoint Health, meanwhile, on Wednesday announced that CEO and President Clay Holderman, a former Presbyterian executive, was departing from the company. Holderman had navigated the merger with Maxwell, who said the collaboration was spurred by operating losses due to COVID and the rising costs of supplies.

UnityPoint Health named Scott Kizer as its next chief executive.

If the deal would have gone through, UnityPoint Health and Presbyterian would have combined to operate a “parent organization,” health systems officials said.

The merger would have brought under one roof administrative functions, which would have reduced duplication and promoted greater efficiency, Maxwell said. For example, the two health systems could have combined electronic health records since both use the privately held Epic Systems Corp.

In order to complete the merger, the health systems had to get approval from federal and state agencies, including the IRS, Federal Trade Commission and the attorney general’s office in each state. But Maxwell said approvals were not an issue in the unraveling.

Presbyterian is looking to restructure because of budget shortfalls. The health system’s operations budget was down $105 million in 2022, which moved the board of directors to explore options to reduce costs. Maxwell at the time described Presbyterian’s fiscal challenges as structural, not cyclical.

He said much of the company’s revenue comes from state and government programs.

Many of those challenges still exist today for Presbyterian, Maxwell said. He said the health system’s operating budget is on track to lose roughly the same amount this year.

“We have to continue our efforts with innovative ideas, innovative business practices, and potential partnerships in order to overcome those expense pressures, and remain an organization that’s going to continue to deliver high-quality care to New Mexicans,” he said.

Maxwell, who was set to move to Denver and take over as CEO of the parent organization, said jobs and patients at Presbyterian won’t be affected because the deal fell through.

“Not pursuing this is not going to have a negative impact on any single individual,” he said.

Maxwell will remain CEO of PHS.

The merger would have created a health system overseeing 4 million patients and employing a combined staff of 40,000, including thousands of physicians.

UnityPoint Health operates hospitals in Iowa, Illinois and Wisconsin. PHS, which includes Presbyterian Health Plan and Presbyterian Delivery System, serves more than 900,000 patients across the state with its nine hospitals, scores of clinics and 13,000 employees.

“We believe this decision allows us to better meet the needs of our patients, team members, communities and key stakeholders,” said Sally Gray, board chair of UnityPoint Health. “As we move forward, UnityPoint Health is focused on identifying new, innovative ways to deliver low-cost, high-quality care to those we serve.”