Essentia Health, Marshfield Clinic call off merger

Duluth-based Essentia Health and Marshfield Clinic, a nonprofit hospital and clinic operator based in central Wisconsin, say they aren't moving forward with a merger announced in July.

Essentia and Marshfield issued a joint statement Friday saying they've ended talks.

In its own statement, Essential Health said Marshfield's finances were the primary factor in its decision.

"To be clear, Essentia's finances are strong, and it is imperative we maintain that stability so we can continue investing in and enhancing care for our patients," the Duluth health system said.

It's the second proposed health system merger to fall apart over the past year in Minnesota, where the Legislature in 2023 expanded the state attorney general's authority to review merger proposals. But Essentia said in its statement that "the regulatory reviews were still in process, and they didn't affect the outcome of our negotiations with Marshfield Clinic."

In July, Minneapolis-based Fairview Health Services and South Dakota-based Sanford Health withdrew their mega-merger proposal after failing to get buy-in from key Minnesota stakeholders.

On Friday, the joint Essentia-Marshfield statement said that after two years of discussions, "we have decided that a combination at this time is not the right path forward for our respective organizations, colleagues and patients."

Essentia Health is Duluth's largest employer with about 15,000 workers. The health system includes 78 clinics and 14 hospitals across Minnesota, North Dakota and Wisconsin.

Last summer, Essentia Health wrapped up a massive four-year construction project that included a new $915 million hospital tower and clinic space. It was the largest private investment in the city's history, spurring further development in what is now termed the city's Medical District, with nearby St. Luke's hospital also expanding.

Essentia plans to tear down its former hospital, which could potentially become the site for a new University of Minnesota Medical School building.

An Essentia merger with Chicago-based CommonSpirit Health, under the Catholic Health Initiatives (CHI), fell through in May 2021. The Duluth health system was poised to take over two dozen CHI-branded properties including CHI St. Alexius Health in Bismarck, N.D., and a suite of rural clinics and hospitals in Minnesota.

Regarding the failed merger with Marshfield, Essentia Health Chief Executive Dr. David Herman said, "As we've explored this opportunity, I appreciate the relationships we've built with the skilled Marshfield Clinic providers, staff and leaders who share our dedication to excellent care."

Marshfield Clinic employs more than 12,000 employees. It operates 11 hospitals as well as 60 clinic locations across Wisconsin and the Upper Peninsula of Michigan.

Dr. Brian Hoerneman, the interim chief executive at Marshfield Clinic Health System, said the nonprofit groups are similar for being high-performing and community-focused organizations.

"Those similarities served as the basis for efforts toward a combination," Hoerneman said, adding that the health systems will "now move our separate ways."

In a Friday statement to bondholders, Essentia added: "We will continue to seek opportunities for collaboration as two mission‐driven, integrated health systems dedicated to sustainable rural health care."

Duluth's second largest health system, St. Luke's, announced in July its own merger plans with Wausau, Wis.-based Aspirus Health.

Minnesota Attorney General Keith Ellison held a public meeting on the two Duluth merger proposals in October that drew mostly support from local leadership, although health care workers sounded more skeptical.

The Minnesota Nurses Association (MNA), which represents union nurses at a number of Essentia Health facilities, welcomed the news Friday, saying the merger threatened to increase costs while eliminating jobs. Chris Rubesch, the MNA president, said in a statement: "The defeat of this planned merger is a win against the further corporatization of our health care system."

Star Tribune staff writer Jana Hollingsworth contributed to this story.