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Lafayette General Medical Center is pictured Tuesday, May 28, 2019, in Lafayette, La.

In a move that would result in the largest health system in the Gulf South, Lafayette General Health System announced Wednesday it is seeking a merger with Ochsner Health System.

The board of trustees of both health systems signed a letter of intent for the merger Wednesday morning, Lafayette General announced. Both organizations will now enter into a period of due diligence and seek required regulatory approvals, which could take several months.

If approved, the merger is expected to be finalized in spring 2020. There will not be a name change in the near future, but David Callecod, Lafayette General Health president and CEO, said there will likely be dual branding for the hospital in the future.

Board members expressed excitement over the opportunities the partnership would bring to health care in Acadiana.

"We're operating from a position of strength," Callecod said. "This is the natural next step in our partnership and provides a unique opportunity to enhance services."

As part of the agreement, Lafayette General will become the regional health care hub in southwest Louisiana for the statewide health system. In return, Ochsner will invest $365 million in additional capital and resources in Acadiana over the next 10 years, $240 million of which is expected to come in the next five years.

The system will invest more than $50 million in expanding key services including pediatrics, women’s health and cancer services as well as introducing behavioral health services.

“Our vision is to truly improve the health of Louisianans and people across the Gulf South,” said LGH board chairman David Wilson. “Just last year, Louisiana ranked as our nation’s least healthy state. By combining our resources and talent, we will be able to provide better access to health care here in Acadiana and to continue growing our local economy.”

Board members emphasized the merger would increase access to care for all patients, regardless of insurance coverage or ability to pay. The merger will also not affect insurance in the near term, but after the merger more insurance providers will be accepted. 

The merger will also bring with it 48 new residency positions to add to the 75 positions at University Hospitals and Clinics along with numerous other jobs throughout the system.

"Ochsner's built partnerships around the state. ... In each of our partnerships, we've actually grown the jobs base. 100 percent. In Slidell, it was about 150 jobs and in St. Tammany Parish, it was about 400 jobs, and it's because we've grown clinical services in those markets and brought new positions and are helping more people stay local," said Warner Thomas, president and CEO of Ochsner Health System.

In addition, they said, it would strengthen training and educations for all employees, providers and caregivers; increase minimum pay for all employees by $2 to $12 per hour; and advance digital innovations all while keeping control of the system here in Lafayette.

“Lafayette General is a tremendous health system known for high-quality care and an extraordinary commitment to patients,” said Ochsner Health System board chairman Andrew Wisdom. “We are proud of what we’ve been able to accomplish through our four-year affiliation, but we know we have only scratched the surface of what we can do together to strengthen access to services in the region and across the state.”

Such mergers are becoming much more commonplace in the health care industry. Over the past three years, 307 hospital partnership transactions have been announced in the United States, and five partnership transactions were announced in Louisiana in 2018, according to Fierce Healthcare.com.

“The reality is that the health care industry is fundamentally changing and creating challenges for health care providers — especially health systems of our size,” Callecod said. “Now is the time to make proactive decisions to fulfill our mission and allow us to thrive well into the future. We are proud to be Acadiana’s trusted health care provider, and in partnership with Ochsner, we will be better positioned to ensure access to local, quality care for generations to come.”

The move was partially prompted by a "wake up call" after last year's state budget situation. A reduction in state funding forced Lafayette General to consider reducing services at University Hospitals and Clinics, to include possible closure of the hospital.

Lafayette General operates University Hospitals and Clinics as part of a public-private partnership that stopped it from being closed in 2012. Callecod said the merger will allow LGH to negotiate with the state for funding from a much stronger position.

"We very much as a system are at the whim of the legislature, and so certainly we do everything we can to make folks understand the great work we do there, but the reality is that this merger will allow us to be in a better position with the state as we're having those conversations because of Ochsner's reach throughout the state," Callecod said.

Lafayette General Health and Ochsner Health System has also launched a website, leadingtogetherla.org, with more information about the proposed merger for doctors, employees and the public.

Lafayette General Health serves the south-central region of Louisiana and has operated its flagship hospital, Lafayette General Medical Center, since 1911. LGH has over $500 million in total assets and employs approximately 4,500 people.

Founded in 1942, Ochsner Health System is one of the largest independent academic health systems in the U.S. and Louisiana largest not-for-profit health system and health system. It owns 40 affiliated hospitals and specialty hospitals and 100 health centers and urgent care centers while employing nearly 25,000 people.

Ochsner Health System and Lafayette General Health have been working together on pediatric subspecialties and diagnostic imaging and biomedical services since 2015.

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Email Dan Boudreaux at dboudreaux@theadvocate.com.