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Megamergers announced between Advocate and Aurora Health Care, Dignity Health and Catholic Health Initiatives

Dec 11, 2017

Two monumental mergers were announced last week, and if the proposed transactions are able to survive state and federal regulatory reviews to gain approval, rankings among the nation’s top hospital systems and integrated health care systems will be shuffled.

On Monday, Downers Grove, Ill.-based Advocate Health Care and Milwaukee-based Aurora Health Care announced that they will merge their organizations to create Advocate Aurora Health, which will be the nation’s 10th-largest nonprofit, integrated health care system, with 27 hospitals and more than 500 sites of care, and will serve nearly 3 million patients annually. Neither system will pay the other any cash in the merger.

Advocate Aurora Health will employ more than 3,300 physicians and nearly 70,000 associates and caregivers, with annual revenue of approximately $10.7 billion. Advocate Health Care CEO Jim Skogsbergh and Dr. Nick Turkal, Aurora Health Care’s CEO, will serve as co-CEOs of the combined health care system, which will have a single board of directors with an equal number of members from each organization. The Advocate and Aurora names will continue to be used, and each health system will maintain its current headquarters. The CEOs said no job cuts are anticipated.

The two systems already have a 20-year relationship through the joint ownership and operation of ACL Laboratories, a community-based testing service that serves health care professionals and employers in Wisconsin and Illinois.

The boards of both organizations approved the plan to merge and the transaction is expected to close by mid-2018, pending the requisite approvals.

Advocate previously attempted to merge with Evanston, Ill.-based NorthShore University HealthSystem, but a federal judge granted the Federal Trade Commission (FTC) a preliminary injunction in March to temporarily halt the merger, leading to a decision to end those efforts. The failed merger cost Advocate $15 million. In the current instance, however, Advocate and Aurora have relatively distinct markets, with little overlap, making it less likely that the FTC will raise any antitrust-related objections.

On Thursday, Englewood, Colo.-based Catholic Health Initiatives (CHI) and San Francisco-based Dignity Health announced the signing of a definitive agreement to combine their organizations.

The resulting non-profit Catholic health system, which is to be named after the transaction closes (tentatively in the second half of 2018) and be headquartered in Chicago, will have more than 700 care sites and 139 hospitals across 28 states, with approximately 159,000 employees and more than 25,000 physicians and other advance practice clinicians, according to a joint press statement. Local facilities will not change names.

The combined organization will be the country’s second-largest health system by operating revenue, with combined revenue of $28.4 billion. Kaiser Permanente is the largest.

Lloyd Dean, CEO of Dignity Health, and Kevin Lofton, CEO of CHI, will serve as co-CEOs of the new health system, with joint oversight of strategy and integration planning, but separate responsibilities and decision-making authority.

The new Catholic health system’s key strategic and reinvestment priorities will include expansion of community-based care, clinical programs focused on special populations and chronic diseases, and the advancement of digital technologies and innovations “like stroke robots and Google Glass” that lead to more personalized and efficient care.

Additionally, CHI and Dignity Health expressed their intent for the new combined organization to become a national platform for innovation and research. Although both boards have given their consent, the merger is still subject to church and regulatory approvals.


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