"We felt that by coming together we would have the best chance to improve the long-term health and wellness of those that we serve and the residents of our area," said Merlis, who is to become CEO of a still-unamed holding company under which both systems would operate.
To facilitate the merger with Holy Redeemer, a Catholic health system, Abington has agreed that it will no longer perform abortions, he said.
The boards of both systems have approved a letter of intent that will allow management to conduct due diligence and pursue a definitive agreement, a process expected to take until early fall. The deal could be completed in the spring, pending regulatory approvals.
The announcement, which came on the eve of the Supreme Court's ruling on the constitutionality of the Affordable Care Act, shows that the systems' leaders expect a dramatic transformation of the health-care industry regardless of how the court rules.
"We believe with the changes that are going to be coming or are already coming from Washington, from Harrisburg, or from employers, that health-care providers are going to have be prepared to provide a continuum of services and be paid differently, either on an episodic basis or taking risk for populations," said Michael B. Laign, CEO of Holy Redeemer, who is in line to be chief operating officer of the new organization.
Laign said the combined management teams had talked of possibly managing care for 500,000 people.
That would be the minimum for success if a health-care provider is taking on such a financial risk, said William E. Aaronson, a professor and health-care expert at Temple University.
Abington, which also owns Lansdale Hospital, and Holy Redeemer have "complementary services and skill sets," Aaronson said, with Abington Memorial Hospital providing a high level of surgical and other acute care and Holy Redeemer having vast experience in home care and other comunity-based services.
But he added that he had a hard time understanding how a merger of the Catholic Holy Redeemer and the secular Abington would work.
"Any time you merge two organizations, you've got a marriage of cultures. Sometimes, they work out. Sometimes, they don't," he said.
Abington, which employs 6,100, is the larger system, with $783 million in revenue in the year ended June 30, 2011. During the same period, Holy Redeemer, with 4,000 employees, had $357 million in revenue.
Bond-rating agencies and other experts have been expecting a wave of nonprofit hospital mergers in response to financial pressures on the industry. Locally, Underwood-Memorial Health System in Woodbury agreed to merge with the South Jersey Health System Inc. in Vineland. Fox Chase Cancer Center's merger into the Temple University Health System is expected to close Sunday.
Merlis said he expected the Abington/Holy Redeemer combination to form a platform for additional mergers, noting, "We think our opportunity is going to be attractive for others to be part of."
Contact Harold Brubaker at 215-854-4651 or firstname.lastname@example.org.