Greenville Health to merge with Palmetto and create S.C. hospital giant

By: Dave Barkholz

Greenville (S.C.) Health System has agreed to “a merger of equals” with Palmetto Health to create the largest hospital system in South Carolina.


The new health system would operate 13 hospitals across the state and serve 1.2 million patients annually, Greenville CEO Michael Riordan said in an interview Friday.

Greenville’s and Palmetto’s hospitals and ambulatory centers don’t overlap much, Riordan said, calling the tie-up a “merger of equals.”

The merger calls for the creation of a board of directors with each system nominating six directors, and two more independent directors to be selected, Riordan said. Riordan will be co-CEO of the new system with his counterpart at Palmetto, Charles Beaman Jr.

The new system will have combined revenue of about $4 billion, Riordan said. The deal is expected to be completed by year end, pending regulatory approvals.

“We will create a culture that attracts, retains and develops the highest quality and diversity of team members, and continue to teach the next generation of physicians and other caregivers,” Beaman said in a statement.

The two systems are coming together under a strategic umbrella to better ensure that patients have a full range of settings for care, reduce the cost of care and to facilitate population management, Riordan said.

Between Columbia-based Palmetto and Greenville, half of South Carolinians are within 15 minutes of a hospital or ambulatory site in the combined system.

Transplant patients and children requiring complex procedures have sought care in Charlotte rather than Palmetto and Greenville, but the combined system hopes to bring them back to the state, Riordan said. Each of the systems also has a relationship with the University of South Carolina’s medical school that can expanded under the merger, he said.

These types of hospital mergers are becoming increasingly commonplace.

The first quarter saw four mega-mergers of hospital systems each with more than $1 billion in revenue.

Deals included Minneapolis-based Fairview Health, which manages the University of Minnesota Medical Center among its seven hospitals, agreeing to merge with four-hospital HealthEast in St. Paul to create a system with annual revenue of more than $5 billion.

Another big hospital tie-up in March involved the UPMC system and PinnacleHealth, a Harrisburg, Pa.-based system that couldn’t overcome antitrust hurdles to merge with Penn State Hershey Medical Center last year.

Greenville, which runs six hospitals, has been on the financial rebound since early 2016, according to a recent report by Fitch Ratings.

Greenville suffered a $15 million operating loss in the first four months of the system’s 2016 fiscal year — a period that ended Jan. 31 — on a mild flu season and the costs of converting to the Epic electronic health records system, Fitch said.

But tight controls on cost and strong volumes after that allowed Greenville to end its fiscal year with an $18.6 million operating gain, the rating agency said. That strong performance continued through the first six months of the 2017 fiscal year with the system posting a $20.9 operating gain in the period ended March 31. Greenville’s 2016 revenue was about $2.2 billion.

Riordan said the rare operating loss in early 2016 forced Greenville to ratchet down on all expenses, including travel. The Epic conversion also is now completed and volumes are back to normal. “It was a good little jolt,” he said.

Fitch noted that Greenville’s conversion a year ago from a public hospital system to an independent not-for-profit would give the system more flexibility to grow through affiliations.

That report affirmed Greenville’s strong rating of AA-.