The financial tale of  two health care mergers

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Good afternoon,

Two mergers – ChristianaCare-(Affinity) Union Hospital, and Nanticoke-Peninsula Peninsula – are now a reality.

A big reason for the ChristianaCare-Union merger was a dim financial picture for Elkton-based health care system and the deep pockets of its neighbor.

Union ended up with a loss of nearly $24 million in a two-year period ending in mid-2018. Affinity, which broke out results separately basically broke even.

Revenues for Union for the two-year period were about $320 million, according to filings with the Internal Revenue Service. Meanwhile, ChristianaCare posted two-year earnings (revenue minus expenses) of $1.1 billion on a two-year revenue figure of $6 billion.

Union had earlier been in talks with a multi-hospital Baltimore-based provider. However, both organizations later agreed to walk away from a deal.

Seaford-based Nanticoke was in far better shape than Union-Affinity with two-year earnings totaling $7 million. Total two-year revenues were nearly $300 million.

By contrast, Peninsula posted a loss of $3.6 million in the two-year period on revenues of about $500 million, a sign that hospitals are less profitable in Maryland.

(It should be noted that the above figures are based on differing fiscal years and results are a year or more behind).

ChristianaCare has a big financial cushion to work with as it works to turnaround Union’s finances. While some cost-cutting will take place, the sheer size of ChristianaCare and normal turnover should allow most of the affected staff to stay around.

Salisbury, MD-based Peninsula faces fewer financial challenges with Nanticoke but has the opportunity to combine overlapping physician practices and outpatient centers in Sussex County.

Both ChristianaCare and Peninsula have pledged to move carefully in integration efforts. After all, both are major players in the western Sussex and Cecil County economies.

Have a great Monday. I’ll be at the Chase Center on the Riverfront tonight to check out the annual meeting of the Delaware State Chamber of Commerce. Keynoters are Dogfish Head founders Sam and Mariah Calagione.

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