Advocate, Aurora plan merger to create 10th biggest nonprofit health system in US

Advocate Health Care and Aurora Health Care on Monday announced they plan to merge next summer to create the 10th largest nonprofit health system in the country.

Each system's board of directors has approved the merger, a 50-50 deal in which neither side is paying the other, but it remains subject to state and federal review, Politico Pro's "Pulse" reports. The deal is projected to be finalized by the middle of 2018.

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Advocate and Aurora are the largest health systems in Illinois and Wisconsin, respectively.

About the merger

The merged system would be called Advocate Aurora Health. It would encompass 27 hospitals and more than 500 sites of care. It would employ more than 3,300 physicians and about 70,000 associates and caregivers, with annual revenues of about $11 billion.

The system would be led by a single board of directors that would have an equal number of members from Advocate and Aurora. Advocate President and CEO Jim Skogsbergh and Aurora President and CEO Nick Turkal would serve as co-CEOs. Aurora Board Chair Joanne Disch would serve as board chair for the first year and Advocate Board Chair Michele Richardson would assume the role for the second.

Each system would keep its current headquarters and brands, although the merged organization would share a budget. According to Skogsberg and Turkal, no layoffs are expected if the merger is finalized.

Details behind merger

The companies cited bigger scale, broader access, greater efficiencies, and "a shared commitment to transform the care delivery model" as driving forces behind the merger, according to a release. The release said the merger would "build on" the two systems' 20-year relationship in jointly operating and owning ACL Laboratories.

The organizations said the merger would enable the resulting health system to curb costs by expanding access to care and bundling purchases, while increasing quality of care by furthering investments in telehealth technology and other initiatives, Modern Healthcare reports.

In a release, Skogsbergh said, "By joining forces we will be able to expand our network to scale innovation and create a destination in the Midwest for patients and the talented clinicians who care for them."

Similarly, Turkal said, "For the communities in Illinois and Wisconsin that we serve and for our two organizations, this is an unprecedented opportunity to shape our future and better serve patients."

Both CEOs said the deal was not driven by financial factors, the Chicago Tribune reports. "I think it would be a mistake to say Aurora or Advocate had a particular (financial) year and that caused them to seek each other out," Skogsbergh said. "This is about a long-term play."

Skogsbergh added that patients would not experience higher costs as a result of the deal, "Pulse" reports.

Review outlook

The Advocate-Aurora deal comes after Advocate unsuccessfully sought to merge with Illinois-based NorthShore University Health System, the Chicago Tribune reports.

FTC challenged the deal, and the two systems abandoned the effort after a federal judge blocked the deal in March. According to "Pulse," the Advocate-Aurora deal might be more likely to gain regulators' approval because the two systems are in different states (Diamon, "Pulse," Politico Pro [subscription required], 12/5; Ellison, Becker's Hospital Review, 12/4; Kacik, Modern Healthcare, 12/4; Schencker, Chicago Tribune, 12/4; Aurora Health Care release, 12/4). 

There's more than just M&A. Get the cheat sheet for hospital partnership and affiliation models.

The field guide to hospital partnership and affiliation models

Behind the flurry of M&A in recent years, a deeper trend of hospital integration is underway: the emergence of alternative partnerships that secure many of the same benefits of M&A without the financial and legal commitment: Clinical affiliation, regional collaborative, accountable care organization, and clinically integrated network.

This guide defines these types of partnerships and offers benefits, drawbacks, and examples of organizations in each.

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