North Texas’ Baylor Scott & White Health heart hospitals are a bit of a mess, but the state’s largest nonprofit health system is considering a merger, according to a company statement. Experts say hospital mergers could offer cost savings in a financial environment that has been difficult for hospital margins.

Let’s unravel the organizational web. Baylor Scott & White Heart and Vascular Hospital is adjacent to Baylor University Medical Center in Old East Dallas and has 53 staffed beds, according to the American Hospital Directory. It was the region’s first hospital focused on cardiac care when it opened in 2002 and is owned and operated by the nonprofit system. Baylor Scott & White Heart and Vascular Hospital – Waxahachie is a relatively new A 30,000-square-foot facility that occupies several floors of the medical office building adjacent to Baylor’s Waxahachie Hospital and is affiliated with Baylor Heart Hospital in Dallas. Additionally, Baylor Scott & White Heart and Vascular Hospital – Fort Worth is an affiliate of the Dallas hospital and occupies 50,000 square feet at Baylor Scott & White All Saints Medical Center – Fort Worth.

In the northern part of the region, Baylor Scott & White The Heart Hospital – Plano is a 109-bed community hospital that opened in 2007 adjacent to the health system’s Plano facility and has a reputation as one of the best heart hospitals in the country. It also has a network of affiliates, including Baylor Scott & White The Heart Hospital – McKinney, which provides outpatient services for BSWH’s Plano heart hospital. The Heart Hospital Plano’s other affiliate is Baylor Scott & White The Heart Hospital – Denton, a 22-bed facility with one of the most extensive open heart surgery programs in the region.

Conformable NewsweekBaylor Scott & White Health has the 20th best cardiac program in the nation. Baylor Scott & White The Heart Hospital—Plano and The Heart Hospital—Denton perform the most combined heart bypass surgeries in the United States and the third most heart valve surgeries in the United States.

Whatever happens, two things are clear: As the population ages, cardiac programs are likely to grow and meet the needs of baby boomers. Additionally, specialty hospitals with a high volume of insured patient surgeries are more profitable than hospitals that provide charity or safety care. According to the National Institutes of Health, cardiovascular expenditures for adults increased from $212 billion in 1996 to $320 billion in 2016. The Journal Circulation finder that one in three adults received care for a cardiovascular risk factor in 2020, and that healthcare costs for cardiovascular risk factors are projected to triple between 2020 and 2050, from $400 billion to $1.3 trillion of dollars.

The six BSWH heart hospitals fall into two major groups, as affiliates of either the Dallas or Plano heart hospitals. When a source told D CEO Healthcare that the system was looking at merging the entities, we inquired with the system, and BSWH responded with a statement: “Baylor Scott & White Health is in the early stages of exploring an opportunity to bring together two of these. its comprehensive and high-quality cardiovascular programs. We look forward to sharing more details if the opportunity develops.”

BSWH has not provided any information on why the organization would want to merge the two programs or exactly which two programs will be brought together, but the most logical option is to merge the Dallas hospital and its affiliates with the Plano entity and its affiliates. D CEO Healthcare spoke with some experts about why a hospital system would want to go down this path, if that’s what the system is thinking.

Daniel Karnuta is a professor at UT Dallas’ Naveen Jindal School of Business and director of the school’s professional health management program. Prior to working at the university, he was CFO of Conifer Health Solutions and spent two decades working for Perot Systems.

Karnuta pointed to funding as an important driver for the potential consolidation of heart hospital leadership. With so many heart hospitals, the organization may have become too top-heavy, with highly paid executives and administrative support staff at each hospital potentially redundant. Consolidating some administrative services could allow the system to deploy its talent elsewhere.

“If everything can be managed centrally, that can be better,” says Karnuta. “A lot of times, the goal is to simplify it so it doesn’t have five or six separate operating units. Over time, all processes become the same.”

If the Dallas and Plano heartland entities merge, ownership could also be a factor. The Dallas hospital is part of the nonprofit health system, while the Plano hospital is a joint venture with local physicians. As the original physician partners have retired over the past 20 years, younger physicians may be less interested in investing in hospital businesses as hospital margins have shrunk, says Evangeline Lalangas, a senior attorney at Bradley who focuses on healthcare and M&A.

In 2010, the Affordable Care Act banned the expansion of physician-owned hospitals and prevented new ones from opening. If The Heart Hospital – Plano changed its ownership structure through a merger with the larger health system, doctors could not open another heart hospital down the road without a legislative change. The American Medical Association and the American Hospital Association continue to make their case elevator or keep banning physician-owned hospitals, respectively.

Changing the ownership structure can offer financial advantages, says Lalangas. “My initial reaction is that the move is driven by payers. There could be an advantage in consolidating ownership of payer contracts. Payer pressure is getting pretty intense; costs increase every year and influence the financial model of operating a hospital, even a productive one.”

Creating a stronger connection between BSWH’s flagship hospital and the system’s facilities in the northern market, where patients are more likely to be wealthier and have better health insurance, could be a smart business move. “With a large patient base and patients coming from all over North Texas, there could be a financial advantage to bringing Plano under the umbrella of the Dallas location,” Lalangas says.