Northwest Community Healthcare inks merger deal with NorthShore

Long rumored, Arlington Heights-based Northwest Community Healthcare on Wednesday announced it has inked a merger agreement that will end its independent status after 61 years.

One of the few remaining independents in the suburbs, Northwest Community is merging with Evanston-based NorthShore University HealthSystem, which operates Evanston, Glenbrook, Highland Park, Skokie and Swedish hospitals, having acquired the last earlier this year.

Each hospital system's board of directors is set to approve the deal this week before it goes before state and federal regulators for their review and approval. Officials hope to close on the transaction by the end of the year. Terms were not disclosed.

The deal follows an 18-month strategic assessment by Northwest Community's board and years of informal discussions between CEO Steve Scogna and NorthShore President and CEO J.P. Gallagher.

Merger talks have swirled around the Arlington Heights hospital for years, amid a local and national trend aimed at cutting costs, increasing buying power, attracting more patients and expanding physician networks.

Northwest Community last publicly called off a merger hunt in April 2013, shortly after Scogna took the helm.

"I don't know that it was a point of pride on independence so much as believing independence was the way from an organizational perspective we could best serve the mission of the organization to take care of the community," Scogna told the Daily Herald. "Most of the models that were out there didn't really seem to have that kind of focus."

But through ensuing talks with Gallagher and NorthShore brass, Scogna said it became apparent their philosophies on community-based health care aligned.

"This new model in this marketplace we feel fits that whole mission and our whole purpose better," Scogna said.

He said the merger doesn't have anything to do with Northwest Community's finances or the effect of COVID-19 on the bottom line. In fact, last week Standard & Poor's reaffirmed the hospital's A rating and its stable outlook, he said.

Together, the larger hospital network will have six hospitals, nearly 200 outpatient locations and some 17,000 employees.

Scogna said patients will have access to greater and different levels of specialty services than they have today. Behind the scenes, Northwest Community will be able to tap into NorthShore's research and data analytics.

Allan Baumgarten, a Minneapolis-based hospital industry analyst, said what likely appealed to NorthShore was Northwest Community's location, allowing the Evanston-based company to expand its footprint west, in addition to a "favorable payer mix" with a number of patients covered by employer-sponsored insurance in the Northwest suburbs.

But Northwest Community's outpatient assets - 23 doctor's offices, five immediate care centers, seven physical rehabilitation sites and 13 labs - may be just as important as the 509-bed Arlington Heights hospital itself, Baumgarten said.

"To the extent they can extend their geography, pick up some new and attractive outpatient centers who will feed the more demanding cases into NorthShore inpatient facilities, I think that may have been a significant part of the appeal," Baumgarten said.

As the coronavirus was ramping up in April, NorthShore centralized treatment of those cases at Glenbrook. There aren't plans to send Northwest Community COVID-19 patients there, a spokeswoman said.

Scogna will remain at the helm of Northwest Community and its board will continue to provide oversight, while having a seat at the table of the NorthShore board.

Northwest Community's brand and logo also will remain intact on the face of its facilities, with some new tie-in to the NorthShore system, Scogna said.

"We really want to make sure that this community knows the 60 years that they've invested in is certainly going to be continuing on and we're very proud of that brand."

Arlington Heights Mayor Tom Hayes said he's been in touch with Scogna, who assured him the transition would be seamless and not diminish the services the hospital provides.

"It's very exciting news for them and everyone affiliated with the hospital," said Hayes, who noted the institution's longtime presence in the community. "They of course are looking for ways to continue to provide high-quality care and treatment for the Arlington Heights community and other communities they serve. I'm sure it's in the best interest of all of their customers and patients."

The Illinois Health Facilities and Services Review Board and Federal Trade Commission are expected to consider the proposed merger in the coming months.

Northwest Community's history of merger talks

1996: Northwest Community, Evanston and Highland Park hospitals discuss a possible merger, according to a 2005 Federal Trade Commission document.

1997: Talks among the parties break down due to "personality conflicts and a lack of interest on the part of Northwest Community," the FTC document said.

1998: Highland Park Hospital again sees Northwest Community as a potential merger partner, the FTC says.

2010: Northwest Community says it is eager to acquire other health care organizations after it had bought Riverwoods-based Affinity Healthcare, a physicians group.

January 2013: Northwest Community says it is seeking another health care partner for a possible merger or alliance. Advocate Health Care is a rumored suitor.

April 2013: Northwest Community decides not to pursue possible mergers.

September 2014: Advocate and NorthShore announce their intentions to merge, in what would become the largest health care system in Illinois and 11th largest not-for-profit system in the United States.

December 2015: FTC opposes the Advocate-NorthShore merger, arguing consumers could face rising health care costs.

March 2017: A federal judge sides with the FTC, scuttling the Advocate-NorthShore deal.

December 2017: Advocate announces plans to merge with Wisconsin-based Aurora Health Care. The deal closes four months later.

2018: Northwest Community's board of directors begins strategic assessment with eye on possible partnerships.

July 8, 2020: Northwest Community and NorthShore announce plans to merge.

Source: Daily Herald archives, reporting