Health systems are partnering up without changing who owns the hospital

St. Christopher's Hospital for Children signed a nonbinding letter of intent on July 15 to form an alliance with Nemours Children's Health, Jefferson Health and Temple Health. A hospital spokesperson told Becker's Hospital Review the arrangement will not be a merger, an acquisition or a change in ownership. The same day, McDermott Will & Schulte published an analysis arguing that for many health systems, full integration or acquisition is no longer the preferred path, and in some cases not an available one.

Kristin Kuchno of Becker's counted four health system partnership announcements in July. Two said outright that no ownership change is on the table. None of the four is a conventional buyout.

That combination, a law firm describing the shift and a trade outlet documenting it in the same week, is the signal for the chief operating officer or supply chain vice president at a community hospital. McDermott's read is that affiliation models let community and regional hospitals get access to scale, technology and management expertise without giving up autonomy. The price of keeping autonomy is that every piece of integration a merger would have handled through ownership now has to be written into a contract.

Four deals, four different shapes

The Philadelphia alliance is the most novel of the four. St. Christopher's, which is owned by Tower Health and Drexel University and serves one of the largest Medicaid populations in the country, would join with three other systems to strengthen pediatric care across the city, according to Becker's. P. Sue Perrotty, chair of the hospital's partners board, said in a statement that the goal is to act proactively, from a position of strength, to preserve what makes the hospital distinctive while making its operations more sustainable.

In California, the structure is already operating. UC San Diego Health and Escondido-based Palomar Health finalized a joint powers authority on July 1 to form Palomar UC San Diego Health, Becker's reported. The new system pairs Palomar's community hospitals with UC San Diego's academic and specialty resources, and a news release described the JPA as a legal entity that lets two public health agencies jointly run hospitals and clinics. The two entered exclusive talks in July 2025, so the path from talks to an operating entity ran roughly a year.

The other two are exploratory. Trinity Health in Minot, N.D., said July 9 it is looking at a strategic integration or partnership with a larger system, citing rising costs and Medicare, Medicaid and commercial reimbursement that does not cover them; board chairman Pat Holien framed the move as proactive positioning rather than reaction. St. Peter's Health in Helena, Mont., and Billings Clinic-Logan Health said July 14 they have opened talks on clinical services, workforce development, technology, purchasing and other initiatives, with no merger or acquisition involved.

The stated reasons differ from deal to deal. In the Montana talks, access is the focus. St. Peter's CEO Wade Johnson said in the release that partnering is essential to improving access where clinical resources are limited.

For a materials manager, the Montana deal is the one to read twice. Purchasing is named on the agenda. If those talks produce a shared purchasing arrangement, supply contracts could end up spanning two systems that remain separately owned, a scenario that changes who signs a GPO agreement without changing who holds the hospital license.

The contract does the work the org chart used to do

McDermott's analysis catalogs the structures in use today. They range from shared services platforms and technology collaborations to payor-provider arrangements, ambulatory joint ventures, service-line partnerships, joint operating agreements and traditional affiliations. The partners have changed too. The firm says relationships now extend past hospital-to-hospital deals to technology companies, post-acute providers and other nontraditional collaborators.

The common thread, per McDermott, is that these models align the parties through shared economics, governance, clinical integration and operational control instead of ownership. That is a longer negotiation, and the firm is specific about what has to be settled before signing: governance design, exclusivity terms, antitrust considerations, community commitments and exit rights.

McDermott adds a less legal point. Health system leaders are consistent on this, the firm writes: the most effective relationships are personal and grounded in shared values, and early alignment on culture and outcomes is often a reliable predictor of whether the partnership delivers. For an operator evaluating a prospective partner, that suggests the diligence list should include how the other side runs its clinics and treats its staff, alongside the balance sheet.

None of this is new in principle. A historical article indexed on PubMed describes how New York City, in the late 1950s, paid private academic medical centers to oversee training, administration and resource procurement at its public hospitals. That arrangement became the durable model for public healthcare in the city. The Palomar UC San Diego Health arrangement, a public community system joining a public academic one, sits squarely in that lineage.

The growth is going outpatient, with or without a partner

If partnership structure is getting more varied, McDermott says the direction of growth is not. According to the firm, a system's economic performance now depends more and more on virtual care, home-based care, specialty clinics, urgent care, imaging and ambulatory surgery centers. Leaders told McDermott that a system built from the ground up today would be designed to be far more outpatient-centric.

The competitive claim is blunt. According to McDermott, a system with a thin ambulatory footprint stands to lose both commercially attractive services and patient access points to faster-moving competitors. Systems are responding by aligning physicians around ambulatory models, reworking care pathways, weighing the economics of each site of service, and making deliberate choices about which services remain in the hospital and which shift to distributed or home settings.

HFMA made a version of this argument in a 2019 piece by Helen Stewart and Eric Kammer, updated in 2022. The authors warned that hospitals which stay organized around inpatient surgery, diagnostics and acute care risk becoming a single input in someone else's care system, left with low-margin inpatient work, declining volumes and high fixed costs. Their alternative was an ecosystem approach in which the hospital organizes the wider patient journey, including outpatient clinics and home services.

For a facilities or capital planning lead, this shifts the question. The decision is less often which hospital to acquire and more often which ambulatory sites to build, lease or joint-venture, and with whom. For systems whose ambulatory footprint is thin relative to nearby competitors, McDermott's framing indicates that gap is now a strategic exposure, not a back-burner project.

McDermott also flags access as a differentiator. The firm says forward-thinking systems treat access as the system's responsibility rather than the patient's burden, which shapes how they deploy technology, design referral pathways and structure partnerships. The parent trying to get a child into a specialist is the person that reorientation is meant to serve.

Payor risk, Medicaid math and AI share the agenda

Outpatient growth and partnership strategy both rest on physician relationships and payor arrangements, McDermott says. Specialist access, referral stability and ambulatory growth all depend on physician alignment. On the payor side, the firm points to several live options for diversifying revenue: population health infrastructure, bundled payments, delegated risk arrangements, Medicare Advantage partnerships and provider-sponsored health plans. Each comes with its own structural and governance considerations.

The financial backdrop explains the urgency. Becker's reports that delayed insurer payments and rising workforce and pharmacy costs are already pressing hospital margins.

AI is the fourth item on McDermott's list. The firm says no strategic conversation in healthcare is complete without it, and that AI touches nearly every operational domain in a health system, clinical documentation among them, which is why it groups AI and digital infrastructure with partnership and payor strategy as things to manage deliberately. For a CIO, that places AI governance inside the partnership negotiation: when two separately owned systems share technology, as the Montana talks contemplate, the governance of the tools becomes a shared question too.

What is signed and what is still a letter

Of the four July arrangements, only Palomar UC San Diego Health is a finished, operating entity. The St. Christopher's letter of intent is nonbinding, and Becker's reporting does not describe operating mechanics such as referral routing or joint contracting. Trinity Health and the two Montana systems have not committed to a structure.

The next signals, then, are whether the Philadelphia alliance converts to definitive agreements and what its governance and exit terms look like when it does. McDermott's checklist is the yardstick: governance, exclusivity, antitrust, community commitments and exit rights. Palomar and UC San Diego needed about a year to get from exclusive talks to a launched system. That is the closest available benchmark for how long the others might take.