Baylor and Memorial Are Breaking Up. Here's Why That May Be for the Best

Sometimes, the best deals are the ones you don’t make.Four months ago, Baylor Scott & White Health of Dallas and Memorial Hermann of Houston announced plans to merge their operations to create Texas' largest hospital system.The combination would reinvent health care, bend the cost curve and enable the two companies to lead the change in their industry, the companies' CEOs said at the time.They were so excited about the prospects that same-day news conferences were held in Dallas and Houston, along with trustees from both boards -- an indication of support deep within the organizations.But on Tuesday, the companies walked away from their plans without even reaching a definitive agreement. The explanation: They can do it on their own.“After months of thoughtful exploration, we have decided to discontinue talks of a merger between our two systems,” the companies said in a joint statement. “Ultimately, we have concluded that as strong, successful organizations, we are capable of achieving our visions for the future without merging at this time.”Officials declined to elaborate on what had changed since the two announced their letter of intent on Oct. 1. In other proposed mergers, deals have fallen apart over financial issues, cultural fit, control of the organization, leadership disputes and regulatory objections -- or a combination of factors.Baylor was always the heavyweight in the combination. In 2018, it had $4 billion more in revenue and over four times more in operating income. Baylor’s profit margins were much higher, and perhaps most important, Baylor had almost $1.3 billion in cash compared with Memorial’s $371 million, according to the companies’ financial statements.While the board seats were to be evenly divided, Baylor’s CEO Jim Hinton was slated to lead the new company. Hinton and another Baylor executive, president Pete McCanna, were to fill two of three positions in the newly created office of the CEO.  Continue reading...