Eruption: Another Mega Health System Merger In The Chicago Marketplace — John G. Baresky

Presence Health (12 hospitals) merging with AMITA Health (9 hospitals), a Chicago-based partnership of Ascension’s Alexian Brothers Health System and Adventist Midwest Health. Adventist Midwest is part of Adventist Health System, a nine-state, 45-hospital health system based in Florida; Ascension Health, based in St. Louis, has 141 hospitals in 22 states.

…According to Kaufman Hall, a Skokie, Illinois based management consulting firm with a long-established healthcare business practice, the number of hospital mergers and acquisitions in 2017 is on track to exceed the number of deals reported in 2016…

Chicago’s health system environment undergoing more drastic change…

A market redefining health system merger was announced on August 22nd impacting one of the largest urban areas in the United States. It will form a wide scale health system connected to the Chicago metropolitan marketplace, nearby suburbs and a sizable portion of northern Illinois. Presence Health (comprised of 12 hospitals) will combine with AMITA Health (a 9 hospital, Chicago-based partnership of Ascension’s Alexian Brothers Health System and Adventist Midwest Health). Adventist Midwest is part of Adventist Health System, a nine-state, 45 hospital health system headquartered in Florida; Ascension Health, based in St. Louis, is comprised of 141 hospitals in 22 states.

​One merger leads to another…

Presence Health is the largest Catholic health system in Illinois. It was formed by combining Resurrection Health Care Corp. and Provena Health in 2011. The merger was successful although integration costs, reimbursement reductions and a competitive health system marketplace has challenged the growth of Presence Health moving forward.

​Patient care firepower…

The new combined entity (which still requires financial due diligence plus regulatory and canonical approval) will have competitive heft against other leading health systems in the Chicago marketplace including Advocate Healthcare, Northwestern Memorial HealthCare and NorthShore University HealthSystem. Another large healthcare provider organization, Centegra Health System, has merger plans underway with Northwestern Memorial. Advocate Healthcare and NorthShore University were forced to abandon their plans to merge based on regulatory barriers earlier in 2017. All of these health systems are well-fortified with clinics, specialty practices and other healthcare service facilities in addition to their hospitals.

​More competition than meets the eye…

Besides these organizations, there are other healthcare heavy hitters in the Chicago marketplace which will be assessing their options. They include Edward-Elmhurst Health, Loyola University Health System, Rush University Medical Center, University of Chicago Medicine and University of Illinois Hospital & Health Science System. All of them are vying for patients and the very best clinicians to treat them. Large physician practice groups in the area, including DuPage Medical Group and Illinois Bone & Joint Institute, may be pivotal in their future alliance or outright acquisition plans.

​The health system crystal ball…

…According to research conducted by the Deloitte Center For Health Solutions and the Healthcare Finance Management Association, hospital / health system merger and acquisitions lower expenses for them but they experience less revenue and margin for the first two years…

Looking ahead, it will be interesting to see what further changes occur in the Chicago marketplace and how they influence health system merger plans in other metropolitan areas nationwide -both from a strategic organizational and regulatory policy/ approval perspective. The larger the health systems become, the more leverage they have in negotiating with healthcare product manufacturers and health insurance plans. They can also streamline administrative costs and accelerate improvements in patient care.

Healthcare product manufacturers will be more closely dialing in marketing, sales and contracting strategies to land and maintain these large customers; health insurers will be even more deeply scrutinizing premiums, employer plans, Medicare arrangements and medical loss ratios. For consumers / patients, there are advantages in being treated within one health system in terms of the total continuum of care, however; this may be at the expense of having less provider organizations to choose from and less competition -potentially leading to higher out-of-pocket costs.

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John G. Baresky — Brand Marketing, Product Management, Digital Marketing, Marketing Leadership, Product Launches, Marketing Strategy, Digital Strategy, Social Media, Market Access, Market Research, Marketing And Sales Collaboration