Methodist, Franciscan sign agreement to explore merger

Methodist Hospitals Northlake Campus is pictured above. Methodist and Franciscan have signed a letter of intent to merge.

Methodist Hospitals has signed a letter of intent to "explore a partnership" with Franciscan Alliance, which would join together two of the largest health care systems in the Region.

Methodist has been looking for a merger partner since last year amid a changing health care landscape. Health care providers across the country have been consolidating to get bargaining power over insurers, better recruit physicians, compile more patient data and adjust to a shift to risk-based contracting where they're paid for performance and patient outcomes instead of by the traditional fee-for-service model.

Methodist President and Chief Executive Ray Grady sent an update to employees Wednesday telling them the system signed a nonbinding letter of intent to explore a partnership with Franciscan over the next 120 days.

"We are optimistic about this opportunity, which offers a path forward to enhance the delivery of high-quality, accessible, cost-effective health care in our region, improving the quality of life of our families and neighbors," he wrote.

"The LOI allows for a 120-day due diligence period of exclusive discussions between Franciscan Alliance and Methodist Hospitals, allowing us to explore whether the relationship is in the mutual best interest of our employees, physicians, patients and communities."

Grady told employees the deal includes an agreement to determine what services and how many services would take place at each hospital in a combined system.

"The LOI articulates a commitment to enhance investments and improvements to the current health care delivery model in the Gary community, as well as additional investments to update our Merrillville facilities, expand our clinical services models and develop centers of excellence," he wrote.

"These robust investments represent new jobs and development that will fuel growth and opportunity for our employees as well as the broader community." 

Franciscan, one of the largest Catholic health care systems in the Midwest, would consolidate with the not-for-profit Methodist, which operates two hospitals, one in Gary and one in Merrillville.

"The Boards and management of Methodist and Franciscan are interested in exploring the possibility of combining our two health systems," Franciscan Alliance President and CEO Kevin Leahy said. "We believe that, together, we can provide better access to care, enhance patient services, improve quality, and lower costs through cooperation. By leveraging the talent and expertise of our physicians and clinical staffs we can improve the patient experience for those whom we are privileged to serve.”

The two health care providers said they planned to meet with physicians, employees, and community representatives to discuss the impact of a merger, which would require regulatory approval.

“We look forward to maximizing the benefits of this partnership that will bring the best of both systems to our communities,” Grady stated.


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Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.