Marshfield Clinic Health System merging with Minnesota-based Essentia Health

Wisconsin’s Marshfield Clinic Health System has entered an agreement with Minnesota-based Essentia Health to create a new health care network serving parts of four states. The deal follows years of heavy financial losses for the Marshfield system.

A joint press release from the two health networks says the agreement will form an “integrated regional health system serving rural and mid-urban communities” in parts of northern Wisconsin, Minnesota, North Dakota and Michigan’s upper peninsula.

“While work remains to finalize our new relationship, this is another positive step in our journey to define the future of health care, and to fundamentally transform rural health care in America,”said Marshfield Clinic Health System CEO Dr. Susan Turney, who announced late last year she will step down as CEO this September.

Marshfield Clinic declined an interview request for this story.

The statement also included comments from Essentia Health CEO Dr. David Herman, who will serve as CEO of the yet-to-be-named parent company of the new health system.

“Each time I meet with our Marshfield colleagues, I am excited for our future together and what we can build and sustain to better serve our patients, communities and colleagues,” Dr. Herman said. “Times are undeniably challenging for rural health care, yet I am certain we can meet those challenges more successfully together than we can separately.”

Essentia Health did not respond to an interview request for this story.

Tax statements from Marshfield Clinic show the challenges facing health care organizations. From 2016 through 2020, the health system had operating losses of more than $48.5 million.

Essentia Health tax statements showed $4 million in losses in 2016, but remained in the black in subsequent years.

Health care industry consulting firm Kaufman Hall reported in April that smaller hospitals and health systems had already been pursuing mergers prior to the COVID-19 pandemic “to ensure their continued strategic and financial viability” amid high fixed costs and increasing competition for outpatient services.

“As health systems adapt to a new environment of razor-thin — and for many organizations, negative — operating margins, we anticipate that this new wave of mergers will continue,” the report said.

During a June 8 hearing before the U.S. Senate’s Committee on Finance, Yale University Associate Professor of Public Health and Economics Zack Cooper told lawmakers that health system consolidations are raising health insurance premiums. He said those rising costs are pushing employers to either lower wages, slow hiring or lay off workers.

“We see evidence of all three happening,” Cooper said.