Anatomy of a health systems 'marriage' proposal

Mar. 19—Relationships drive so much of what happens in life, whether it's business or personal.

In the case of Presbyterian Healthcare Services and Iowa-based UnityPoint Health, a relationship between the two companies' top executives helped lead to a proposed parent organization — one they say will ease cost burdens and consolidate administrative functions of the two health systems.

UnityPoint President and CEO Clay Holderman previously worked as the executive vice president and COO at PHS. Dale Maxwell, on the other hand, has served as CEO and president of PHS since 2016. Maxwell and Holderman worked closely together at PHS, building a trusted relationship in the process and one that still exists even though the two no longer work together under the same roof.

That relationship, Maxwell says, led to the news of a proposed parent organization that dropped earlier this month. Both health systems, like many others across the country, had faced losses since the onset of the pandemic, he said.

"Clay (Holderman) and I, based on our relationship from him working here at Presbyterian for a number of years, maintained contact over the past two years," Maxwell said. "We were talking about the challenges in health care and how in order to continue to deliver high-quality care in both of these markets, we were going to have to do something substantially different."

Maxwell added: "At the same time, both boards were looking at the same issue and both systems were trying to understand what changes were necessary to be made. Clay and I talked about, 'Well, maybe there's something we can do together."

Those talks have happened for some time, but they really started coming together in September, Maxwell said, as both health systems were looking to get through the challenges that COVID created. Those challenges for Presbyterian, he said, were rising costs with stagnant revenue. Roughly 75% of Presbyterian's revenue comes from state or federal governments, he said, which has remained fixed or flat, thus creating an "operating loss."

"These issues are not unique to Presbyterian," Maxwell said.

He said the boards of PHS and UnityPoint looked at other options to get through the challenges COVID presented, but partnering with UnityPoint made the most sense because the two are "like-minded systems."

I wasn't able to get Holderman on the phone, but he did speak with news organization Becker's Hospital Review about the proposed parent organization, echoing much of what Maxwell said.

"The fact that Dale (Maxwell) and I have a trusted relationship, the discussions between our boards, these have been a huge facilitator of speed — trust has been a great accelerator of the process," Holderman told Becker's.

Holderman, in his interview with Becker's, pointed to the strength of Presbyterian's health insurance arm, Presbyterian Health Plan, and the strength of UnityPoint which is in its robust hospital ecosystem with more than two dozen hospitals spread across three states.

Holderman said the coming together of the two health systems would generate an estimated $11 billion in annual revenue. There are some barriers that need to be crossed first before the parent organization is formed. That includes notifying and receiving approval from the state Attorney General's Office, the Federal Trade Commission and the IRS.

But the proposed parent organization, which is still in its exploratory phase, may not have come together this quickly if Holderman and Maxwell didn't have that relationship.

As the saying goes: It's not what you know, it's who you know.