Advocate, NorthShore merger means 16 hospitals, 3 million patients

  • Sherman Hospital in Elgin is one of 12 hospitals in the Advocate Health Care system, which announced plans to merge with NorthShore University Health System. It would create the largest health care system in Illinois with suburban hospitals in Barrington, Downers Grove, Elgin, Evanston, Glenview, Hazelcrest, Highland Park, Libertyville, Oak Lawn, Park Ridge and Skokie.

    Sherman Hospital in Elgin is one of 12 hospitals in the Advocate Health Care system, which announced plans to merge with NorthShore University Health System. It would create the largest health care system in Illinois with suburban hospitals in Barrington, Downers Grove, Elgin, Evanston, Glenview, Hazelcrest, Highland Park, Libertyville, Oak Lawn, Park Ridge and Skokie. Rick West | Staff Photographer

  • James H. Skogsbergh, president and CEO of Advocate Health Care

    James H. Skogsbergh, president and CEO of Advocate Health Care

  • Mark Neaman, president and CEO of Northshore University Health System

    Mark Neaman, president and CEO of Northshore University Health System

 
and Mick Zawislak
akukec@dailyherald.com
mzawislak@dailyherald.com
 
Updated 9/12/2014 11:25 PM

The merger of Advocate Health Care and NorthShore University Health System announced Friday aims to create the largest health care system in Illinois that will focus heavily on outpatient and home care and provide more technology to communicate with patients.

The merger could be approved later this year, creating the newly christened Advocate NorthShore Health Partners with a combined 16 hospitals in Chicago, the suburbs and central Illinois, and about 45,000 employees.

 

Merging the workforces could create redundant positions. Yet, the CEOs for both systems said no layoffs are immediately planned and they instead will rely on attrition and retirements.

"Each of us has always been focused on reducing costs," said Advocate President and CEO Jim Skogsbergh. "But we have the luxury of time now to analyze the operations for efficiencies."

Advocate and NorthShore are part of a continuing stream of mergers in recent years as hospitals and health care systems prepare for a rapidly changing environment outlined in the federal Affordable Care Act. The Advocate-NorthShore deal comes on the heals of Chicago-based Northwestern Memorial Healthcare merging with Winfield-based Cadence Health, Elgin-based Sherman Health Systems joining Advocate Healthcare, and Naperville-based Edward Health Services Corp. merging with Elmhurst Memorial Healthcare.

Such mergers will continue, said Allan Baumgarten, a Minneapolis-based hospital analyst who has published the "Illinois Health Market Review" biannually since 1998.

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Baumgarten said Advocate had roughly 16 percent of the Chicago and suburban market but will now have 22.5 percent after the merger is approved. Advocate and others likely will continue to search for more partners in the future as the market continues to consolidate.

"We do expect additional combinations, but not just mergers. There are hospitals in Michigan and Wisconsin that have formed strategic alliances, where they operate separately but do business together to save money," Baumgarten said. "But many of these hospitals say that when they combine, it improves quality for patients. It sounds good, but it's hard to say if they're making significant progress with that."

Skogsbergh and NorthShore President and CEO Mark Neaman said they will keep eyes open for future partners or mergers.

"Both of us have been very actively involved with talking with other organizations," Skogsbergh said. "And everyone has been talking to everyone."

Skogsbergh and Neaman agreed that more hospital and system mergers are expected to boost their buying power for supplies, attract more patients, and provide a higher level of physician talent to serve communities.

                                                                                                                                                                                                                       
 

Patients likely won't see any dramatic changes this year. The system leaders said they will wait until the merger closes to study internal operations and then make changes by 2016, a time when the federal health care law will be in full swing.

The new Advocate NorthShore then will serve about 3 million patients a year at 16 hospitals, many of them in the suburbs.

More hospitals won't be built under the newly merged organization. Instead, they will focus more on home care and outpatient care, the CEOs said.

Also, the CEOs said they aim to improve technology platforms that provide easy access and uniformity throughout the newly merged system. This will provide each facility and office with links to each other, to records, and to platforms with patients.

They also are exploring technology that will allow patients to better manage their health care and to more easily communicate with their physicians and hospitals, they said.

Advocate is the larger entity and already the biggest in Illinois with 35,000 employees and 12 hospitals, including those in Barrington, Downers Grove, Elgin, Hazelcrest, Libertyville, Oak Lawn and Park Ridge. Northshore has 10,000 employees and operates hospitals in Evanston, Glenview, Highland Park and Skokie. Together, the system will be the 11th largest not-for-profit health system in the U.S.

Advocate had 2013 revenue of $4.9 billion and NorthShore had $1.8 billion.

The boards of directors of both systems voted this week to sign an affiliation agreement, which is subject to state approval as well as approval by the Federal Trade Commission and the United Church of Christ, which is affiliated with Advocate.

The two men will serve as co-CEOs of the new group for two years. The deal calls for Neaman to then retire and for Skogsbergh to become the sole CEO.

"We share a long-term strategy to reduce costs while improving efficiencies and advancing quality. We have to be leaders in an ever-changing health care marketplace, and by working together, we can enhance access to care across the diverse communities we serve," said Steven Crown, NorthShore board chairman.

A spokesman for Naperville-based Illinois Hospital Association declined to comment because the hospitals are members of the state organization.

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