Memorial Hermann, Baylor Scott & White Discontinue Plans For Merger

The joint system would have created the largest hospital system in Texas.

| February 5, 2019, 10:18 AM (Last Updated: February 5, 2019, 3:32 PM)

Memorial Hermann Health System and Baylor Scott & White Health have canceled plans for a merger previously expected to create the largest health system in Texas.

From left to right: Chuck Stokes, president and CEO of Memorial Hermann; Jim Hinton, CEO of Baylor Scott & White Health; Ross Mcknight, chair of Baylor Scott & White Holdings Board of Trustees; and Deborah Cannon, chair of the Memorial Hermann Health System Board of Directors, during a press conference held in Houston on Oct. 1, 2018, to announce the merger.

“After months of thoughtful exploration, we have decided to discontinue talks of a merger between our two systems. Ultimately, we have concluded that as strong, successful organizations, we are capable of achieving our visions for the future without merging at this time,” the hospitals said in a statement posted to a website once used to announce the merger. “We have a tremendous amount of respect for each other and remain committed to strengthening our communities, advancing the health of Texans and transforming the delivery of care. We will continue to seek opportunities for collaboration as two forward-thinking, mission-driven organizations.”

Both systems announced plans to combine their boards, leadership teams, and operations in October of 2018. The move would have created a system of 68 campuses employing 73,000 people in Texas in more than 30 counties, the hospitals said.

While heralded as efficient and cost-effective by the leadership of both hospitals, news of the merger renewed criticism of large hospital systems, whose critics say costs to patients tend to rise when hospital systems consolidate.

“The resulting increase in market power means that the hospital doesn’t have to pass any cost savings on to the customer,” said Vivian Ho, a healthcare economist at Rice University. News of the merger’s cancellation comes as a relief, she said.

“Our goal was never about getting bigger,” Memorial Hermann President and CEO Chuck Stokes said in a memo to employees obtained by the Houston Business Journal. “Our goal is to create a model for integrated, consumer-centric, cost-effective care, and I am confident in Memorial Hermann's ability to accelerate and achieve this effort.”

Bob Harvey, president and CEO of the Greater Houston Partnership, also reacted to the news with a statement and commended the leadership of Memorial Hermann and Baylor Scott & White “for the courage to step back from the deal when they determined it would not meet the objectives that had been set.”

This is a developing story and will be updated.