Froedtert Health and ThedaCare have begun the process of merging their organizations into one with the goal of launching a combined health system by the end of 2023.

The hospital systems announced Tuesday that they have signed a letter of intent to merge and said the goal of the merger is to improve the health and well-being of their patients and communities.

The health system says combining into one organization will build on their past work together to close gaps in healthcare, recruit and retain staff, and develop innovations to meet patient needs.

“Both of our organizations have deep, long-standing relationships in the communities we serve. Our Wisconsin roots have been instrumental in creating creative solutions to meet the health needs of our communities,” said Kathy Jacobson, president and CEO of Freudart Health, in a statement “united with the state’s leader in regional community health. By becoming, our combined organization will be poised to meaningfully address health equity and disparities, increase access to a broader range of services, and make it easier for patients to navigate the healthcare system.”

ThedaCare and Froedtert will spend the next few months hammering out the details of a definitive agreement that will outline the combined health system’s commitment, officials said. The combined company will be governed by an 18-member board with representatives from both companies along with the presidents of Freudart and ThedaCare, hospital officials said.

Jacobson will initially assume the role of CEO of the integrated health system, but plans to retire after a six-month transition period. Imran Andrabi, president and CEO of Thedacare, will serve as president during the transition. Following Jacobson’s retirement, Andrabi will become president and CEO of the integrated health care system.

Hospital officials said they haven’t decided on a name for the merged health system, but it’s important to find a way to continue using their existing names because they are trusted in their local communities.

Friedtart is located in Milwaukee and primarily serves southeastern Wisconsin. Meanwhile, ThedaCare is based in Neenah and has facilities primarily in northeastern and central Wisconsin.

“ThedaCare and Froedtert Health are committed to the people of Wisconsin,” Andrabi said in a statement. “We are similar in many ways, and our leaders and our boards have long been asking how we can accelerate our work to make a positive and lasting impact in our state.”

The announced Froedtert and ThedaCare merger is the most recent in Wisconsin and comes after Gundersen Health System with Bellin Health, and Advocate Aurora Health with Atrium Health in late 2022. Marshfield Clinic Health System and Essentia Health also announced merger talks last year.

ThedaCare and Froedtert have worked together in the past. Last October, they announced a partnership to build micro-hospitals in Fond du Lac and Oshkosh, offering emergency and outpatient services.

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“We have a shared vision for what we can do together to improve the health and well-being of communities and to be active partners in health. We are excited to begin exploring how we can build a healthier, brighter future for Wisconsin,” Andrabi said in a statement. .

In October 2022, Jacobson told the Milwaukee Business Journal that his health system had no plans to merge with ThedaCare. During a press conference Tuesday, Jacobson said the two companies have gotten to know each other better over the past year, which is why plans to merge have changed over time.

“We found out how easy it was to come together and build that partnership because of how aligned we really were,” he said Tuesday. “And it just became a natural next step.”

Froedtert reported million-dollar losses in back-to-back quarters last year, ended June 30 and Sept. 30, respectively, the Milwaukee Business Journal reported. However, hospital officials said Tuesday that the merger is not necessary.

“We don’t need to do that,” Jacobson said. “We want to do it because we think it will make us better.”

In December, University of Wisconsin-Madison economist Alan Sorensen told Wisconsin Public Radio that the merger could give hospitals greater leverage in negotiations with insurance companies.

He said insurance companies want to pay as low as they can negotiate, while health care providers want to pay as much as they can negotiate.

“These discussions are very important to the bottom lines of these companies,” Sorensen said at the time. “A lot of times what drives mergers is that (hospital systems) feel like if they’re bigger, they’re going to do better in that negotiation, they’re going to have more bargaining power, they’re going to be more indispensable to the insurance company.”

Even so, John Raymond, president and CEO of the Medical College of Wisconsin, said Tuesday that the merger of Freudart and ThedaCare will further bring high-quality health care to more Wisconsinites.

“The Medical College of Wisconsin is both grateful and extremely encouraged by this partnership, which will enable us all to work together to impact research, from early discovery to clinical trials and population health,” he said during the news conference. “And we are committed to being strong allies of these two outstanding health systems as they come closer together and merge into one entity.”

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