Baylor, Scott & White Sign Agreement of Intent to Join Forces; Create New Health System

DALLAS & TEMPLE, Texas --(Business Wire)--

The boards of Baylor Health Care System and Scott & White Healthcare have approved the signing of an agreement of intent to combine the strengths of their two health systems to create a $7.7 billion organization with the vision and resources to offer its patients continued exceptional care while creating a model system for an industry undergoing fundamental transformation.

The alliance reflects a vision by leaders from two of the nation's preeminent health systems to create a new health system engineered to meet the demands of health care reform, the changing needs of patients and payers and the extraordinary advances in clinical care.

The new system, named Baylor Scott & White Health, will include the organizations' combined 42 hospitals, more than 350 patient care sites, more than 4,000 active physicians, 34,000 employees and the Scott & White Health Plan. It would be the largest not-for-profit health system in Texas and one of the largest in the United States. It would be governed by a single board with equal representation from both founding members.

With approval of the agreement of intent, the organizations have entered a period of exclusive negotiations and due diligence. The next stage in the transaction -- a definitive agreement -- is anticipated to be complete in 2013.

"Baylor has a century-long tradition of quality, innovation and service. And in this time of great change in the health care industry, Baylor is looking forward and preparing to once again lead by joining forces with Scott & White to create this new model of care," says Joel Allison, president and CEO, Baylor Health Care System. "Scott & White is a perfect partner for us as it is nationally known for its high-quality, efficient care. Our proposed new organization reflects many months of discussion between our two like-minded systems on how we could work together to continue to meet the needs of the communities we serve in this dramatically changing environment. The new organization will continue to honor and carry forward Baylor's 100-plus-year legacy as a Christian ministry of healing."

Because of industry changes, the number of hospital partnerships, mergers, joint ventures and other arrangements designed to bring like-minded health systems together is growing rapidly. Since 2008, there have been 274 mergers and acquisition transactions affecting 439 hospitals, up nearly 22% over the previous four-year span.

In this new era, health systems must be prepared for declining reimbursement, high levels of information management, an increasing demand for primary care services and "population health management" to advance the wellness of large groups of patients and keep them out of the hospital.

"Our new organization will not only prepare us for health care reform but will help drive and shape what health care delivery in this country will become," says Robert Pryor, MD, president and CEO, Scott & White Healthcare. "Scott & White has been recognized as a national leader for our strong physician-led population health mdel. Our shared vision with Baylor is to build upon our unique approach and create an innovative health care delivery model enhanced by medical education and research."

Both organizations are affiliated with Texas A&M Health Sciences Center and have extensive investments in medical education and research. Baylor Scott & White Health will have the ability to expand training opportunities for the next generation of health care professionals by integrating education programs at both organizations.

The details of the agreement of intent include:

Unified Board: A unified board of trustees will be comprised of 14 individuals with an equal number of representatives from each institution. Drayton McLane, Jr., the chair of the Scott & White board of trustees, will serve as chair of the new organization's board. Jim Turner, the chair of the Baylor Health Care System board of trustees, will serve as chair-elect of the new organization's board.
Leadership: The new organization will be led by a single executive leadership team. Joel Allison will serve as chief executive officer of the new company. Dr. Robert Pryor will also serve as president and chief operating officer of the new organization.
Operations: The new system will have two operating divisions, which will consolidate over time. The Scott & White division will be headquartered in Temple, and the Baylor division will be headquartered in Dallas.
Brands: The new organization will be called Baylor Scott & White Health. Both Baylor and Scott &White will retain their individual brand names.
Foundations: The foundations will remain separate.
Medical Staffs: The medical staffs will remain independent.

"This partnership is the right thing for Baylor. It's the right thing for Scott & White. And, it's the right thing for our communities," said Drayton McLane, Jr. chair of the Scott & White board of trustees. "Both health systems are well-organized, well-run, best-in-class organizations. We can learn from each other, and I think this only benefits the patients we serve by allowing us to deliver better quality care and increased access to care."

For patients, the new organization will ultimately mean:

Greater, more convenient access to high-quality care through an extensive network of physicians, advanced practice professionals, medical centers and hospitals throughout North and Central Texas.
Increased coordination of patient care.
Improved patient outcomes, by combining the expertise of primary care physicians, medical specialists and adopting the best practices of both organizations.
The ability to attract, retain and train the very best national and international talent.
Greater access to world-class primary and pediatric care and centers of excellence in cardiology, oncology, transplant, rehabilitative medicine and more.

"Together, our two health systems will cover two geographically diverse areas that are nearly contiguous and highly complementary," said Jim Turner, chair of the Baylor Health Care System board of trustees. "We strongly believe our neighboring geographies will allow us to be well-positioned to lead the transformation of health care in Texas and beyond."

For more information, visit www.VisionforTexasCare.com.

About Baylor Health Care System

Baylor Health Care System is a not-for-profit, faith-based supporting organization providing services to a network of acute care hospitals and related health care entities that provide patient care, medical education, research and community service. Baylor recorded more than 2.8 million patient encounters, $4 billion in total operating revenue, $5.2 billion in total assets and $502 million in community benefit in fiscal year 2011 (as reported to the Texas Department of State Health Services). Baylor's network of more than 300 access points includes 30 owned/operated/ ventured/affiliated hospitals; joint ventured ambulatory surgical centers; satellite outpatient locations; senior centers and more than 180 HealthTexas Provider Network physician clinics. For more information, visit www.baylorhealth.com.

About Scott & White Healthcare

Scott & White Healthcare is a non-profit collaborative health care system established in 1897 in Temple, Texas. Among the leading health systems encompassing one of the nation's largest multi-specialty group practices, Scott & White provides personalized, comprehensive health care enhanced by medical education and research. Scott & White Healthcare includes 12 hospital sites with two additional announced facilities, and 178 clinics at more than 65 clinic locations throughout Central Texas providing adult and pediatric care in 46 medical specialties. Integrated, high-quality care is delivered by a dedicated staff of more than 14,000 (including 1,000 employed physicians and scientists and more than 300 advanced practice providers). For more information, visit www.sw.org.