February 16, 2023 Episode 051

Scaling up. Scott Powder Talks About the Merger of Advocate Aurora Health and Atrium Health to Build One of the Nation’s Largest Health Systems

For the past 30+ years Scott Powder has had a front row seat to the growth and development of nonprofit healthcare in the U.S., and after the merger of Advocate Aurora Health and Atrium Health, is playing a key role in the mega system’s transformation.

Scaling up. Scott Powder Talks About the Merger of Advocate Aurora Health and Atrium Health to Build One of the Nation’s Largest Health Systems

Advocate Health is the nation’s fifth largest nonprofit health system, operating 67 hospitals and more than 1,000 sites of care to generate revenues topping $27 billion.

This new entity was formed by combining two like-minded, not-for-profit health systems in December 2022: Midwest-based Advocate Aurora Health and Southeast-based Atrium Health.

While this was among the biggest mergers ever in the nonprofit healthcare ecosystem, it wasn’t the first for Scott Powder. In the early 1990s, Scott began working for Evangelical Health System, a pioneer of horizontal integration, which later became Advocate Health Care. Over the next 30+ years serving in various strategy and planning roles, including overseeing the 2018 merger of Advocate Health Care in Illinois and Aurora Health Care in Wisconsin, Scott had a front row seat to the growth and development of the healthcare ecosystem.

Scott is now President of Advocate Health Enterprises, where he is responsible for advancing Advocate Health’s whole person health strategy by investing in solutions that complement the health system’s core clinical offerings and broaden its business portfolio.

In this episode of Healthcare is Hard, Scott talks to Keith Figlioli about the strategy behind creating Advocate Health, and the market forces driving it. They discuss topics including:

  • The shifting mindset on geography. One of the most unique things about the new Advocate Health is its geographic footprint. While Illinois and Wisconsin are neighboring states, the company now also serves communities much further away in North Carolina, South Carolina, Georgia and Alabama through the merger with Atrium. Scott talks about the traditional mentality that all healthcare is local and how he doesn’t believe that is the case anymore. He discusses the role geography still plays in high acuity care, and how technology is enabling so many more elements of healthcare to be delivered practically anywhere.
  • The debate over scale. There’s concern in the market about some health systems becoming too big, and a debate about whether or not these organizations are truly optimizing the value of their scale – or if they ever will.  But Scott points out how scale is relative, especially in a fast-evolving healthcare market. For example, he raises the point that even if the five largest nonprofit health systems in the country were combined, they would still only generate half the revenue of a company like CVS Health or United Health Group, and only a fraction of the revenue of players like Amazon. He also talks about ways health systems can create scale outside of traditional M&A, such as joining forces around issue-specific consortiums.
  • Dual transformation. Scott compares the difficult decisions facing healthcare to other industries like automotive, where companies have made commitments to move away from the core of their business – the internal combustion engine – in favor of investing in electric vehicles of the future. He talks about the capital-intensive demands of operating a core clinical care delivery business, and how challenging it is to divert money from those operations to invest in other areas. But he says it’s the only way incumbent health systems will survive.
  • Care in the home. A lot of Scott’s focus at Advocate Health Enterprises is around a thesis that a person’s home will be a center for care delivery in the future. He believes there will always be a need for hospitals, but that they’ll look very different in the future, and he talks about acquisitions Advocate has made to marry personal care, clinical care and technology in the home.

To hear Keith and Scott talk about these topics and more, listen to this episode of Healthcare is Hard: A Podcast for Insiders.