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For now, Greensboro-based Cone Health and Sentara Healthcare of Norfolk, Va., are downplaying the effects on jobs of their planned merger.
The two organizations announced the signing of a letter of intent to merge earlier this summer. According to an Aug. 12, statement from Cone Health, there will be no short-term effects on physicians or staff of the two systems.
“Both organizations and their leadership teams will operate as usual” while the merger is going through regulatory approval procedures by federal and state authorities, according to the Cone Health press release. That process is expected to be finalized in mid-2021.
Although it’s too soon to know what specific changes might affect employees as the two systems integrate following regulatory approval, they have a commitment to avoid layoffs, Cone Health CEO Terry Akin said.
“Our people are the ones who care for our communities,” Akin said. “They are our most precious resource.”
The move is the latest in a trend of health care mergers across North Carolina, some of which have raised or continue to raise labor concerns.
HCA Healthcare, a for-profit company based in Nashville, Tenn., merged with Asheville-based, nonprofit Mission Health, the largest hospital operator in Western North Carolina, in 2019. Since then, concerns have arisen about staffing cuts and quality of care that have drawn the attention of the N.C. Attorney General’s Office and led to an ongoing unionization effort by nurses.
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A merger between Cone Health and Sentara would differ from that merger because both are nonprofit organizations. Cone Health has a roster of operations that includes six hospitals centered in the Greensboro area, including facilities in Guilford, Alamance and Rockingham counties. Sentara Healthcare has a network including 12 hospitals located largely in southeastern Virginia, in addition to a presence in coastal North Carolina.
Howard Kern, the president and CEO of Sentara, is set to lead the merged organization from Norfolk, according to the statement from Cone Health. However, Greensboro will remain the location of a regional headquarters for the Cone Health division, with Akin at the helm as president of that division.
Cone Health will also have representatives on the Sentara Healthcare board and will participate in governance, according to the Cone Health statement. There will also be a Cone Health Regional Board with community members, medical staff and Sentara representatives.
Both systems boast health care plans as well. Currently, Cone Health has a Medicare Advantage health plan, HealthTeam Advantage. Sentara has its Optima Health Plan and Virginia Premier Health Plan.
There will be health insurance plan headquarters for the combined Optima Health Plan in both Greensboro and Norfolk, Akin said.
Long-term questions for employees
The question of what the potential long-term effects of this move on current or future employees remains.
Martin Gaynor is a professor of economics and public policy at Carnegie Mellon University. He gave a statement before the Committee of the Judiciary Subcommittee on Antitrust, Commercial and Administrative Law in the U.S. House of Representatives in March 2019.
In his summary, he explained that the U.S. health care system is based on markets. Health care consolidations can result in local areas lacking competition, dominated by one system alone. That has the potential to lead to increased prices for hospitals, insurers and physicians, Gaynor said.
Cone Health communications pointed out that the footprint of the two systems does not overlap.
“The combined organization will ensure that consumers have more choices for health care and insurance plans, not fewer,” reads the Cone Health statement. “The merger will deliver health care in more ways and more places with more options to pay for it.”
However, Gaynor also cited evidence that prices can increase even when the merging systems are in different areas. There’s also evidence that consolidation among competitors can increase prices without making any gains in quality or efficiency, he said.
Although there may be opportunities to look for efficiency gains over time, Cone Health’s merger with Sentara is primarily about growth, Akin said. It will result in higher-quality health care that is accessible and affordable for community members.
Both health care systems are keen to expand value-based health care models, increase insurance options and use technology to provide more access points for patients, according to the Sentara press release about the merger.
Apart from price and quality of care, academics who study mergers often look at three types of potential effects on employees, said Elena Prager, assistant professor of strategy at the Kellogg School of Management at Northwestern University. Those include quantity of jobs, pay and working conditions.
As far as the number of jobs goes, integrating two companies can result in job losses as redundant positions are eliminated or more efficient operations are pursued.
Attrition and reassignments, not layoffs, will be used as the two systems integrate, Akin said. When asked if the merger could result in a net loss of jobs in the Cone Health region over time as the systems integrate, Akin said the essence of the move is about the expansion of access for a greater number of people.
“As we look to take more care into more places close to home, as we look to expand our access through digital and virtual means, there’s going to be a need for people to work,” he said.
The Optima Health Plan will also have a headquarters in Greensboro, Akin said.
Less competitive health care labor markets have the potential to lead to lower wages for health care workers and disincentives for companies to invest in human capital, Gaynor said. This depends on the levels of local alternative workplaces and jobs, he said, especially for specialized health care workers.
“We have a big shared commitment to treating our people very well and to being the employer of choice in an incredibly competitive environment,” Akin said when asked about potential effects on employees’ wages.
Not Sentara’s first NC acquisition
For Sentara, this move is the latest in a series of mergers and acquisitions as the system has grown over time. Sentara has undergone seven mergers or partnerships since 2000.
The last was a partnership with Albemarle Health in Elizabeth City in 2014. That process did not involve layoffs, said Dale Gauding, who works on Sentara’s communications team.
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Although there was “some right-sizing of staff,” it was achieved through retirements and normal attrition, he said. Moreover, a market survey done by Sentara resulted in a raise in base pay for some clinical staff members, Gauding said.
Sentara also has an existing internal program that reassigns employees if business changes affect their jobs, Gauding said. No Sentara employees have lost their jobs during the COVID-19 pandemic. Business changes were handled with reassignments, the encouragement of employees to take vacation time and “brief” furloughs, he said.
“Both systems have histories of preserving jobs and not having layoffs, even during economic downturns, and that philosophy of appreciating employees’ contributions will continue,” Gauding said.
Regulatory approval awaits
The merger between Sentara and Cone Health has to be approved by the Federal Trade Commission and the N.C. Department of Insurance, according to Gauding. The N.C. Attorney General’s Office also reviews transactions, although it depends on the specifics of the potential merger.
“Our office is waiting for more details to determine the appropriate level of review for this transaction,” said Laura Brewer, communications director at the N.C. Department of Justice.
Following regulatory approvals, it could take up to two years to fully integrate the two operations, according to Sentara’s announcement of the merger.
Although the firm details of how integration could potentially affect employees are still to come, the integration process and any accompanying changes “will be over time and very thoughtful,” Akin said.
“Cone Health’s not going anywhere. We’re going to get better and stronger.”
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