Advocate, Aurora Hospital Merger Deal Earns Regulatory Approval

March 23, 2018 - Federal and state authorities recently gave the proposed hospital merger between Illinois-based Advocate Health Care and Wisconsin-area Aurora Health Care the greenlight, the health systems announced in a joint press release.

The health systems explained that they are moving forward with creating Advocate Aurora Health, the tenth largest health system in the country, after the Wisconsin Office of the Commissioner of Insurance recently approved the proposed hospital merger deal. The Federal Trade Commission and Illinois Health Facilities and Services Review Board approved the deal in February.

“We’re full steam ahead,” stated Jim Skogsbergh, President and CEO of Advocate, who was also named Co-CEO of Advocate Aurora Health. “A team of leaders from both systems have developed a comprehensive integration plan that will allow us to accelerate our efforts on safety, health outcomes, consumer experience and cost while delivering value for the patients, communities and employers who count on us.”

Advocate is already the largest health system in Illinois and one of the largest provider organizations in the Midwest. The health system plans to add to its almost 400 care sites and 12 hospitals by expanding across state lines into Wisconsin through a merger with a like-sized health system.

The Illinois-based health system faced opposition to an earlier hospital merger proposal involving NorthShore University HealthSystem based in the Chicago area. Advocate abandoned the deal in March 2017 after the Federal Trade Commission opposed the merger.

The commission raised concerns that the two Chicago-area health systems would decrease competition for healthcare services since the combined health system would control over one-half of hospital inpatient services in the region.

The new deal between Advocate and Aurora Health Care did not receive the same criticism because the health systems operated in different markets in different states. “This is not a series of ZIP codes in the northern area of Chicago,” Skogsbergh told The Chicago Tribune in December 2017.

The Federal Trade Commission and state agencies approved the proposed hospital merger deal, allowing the new health system to operate over 500 care sites and 27 hospitals, while employing more than 3,300 physicians and nearly 70,000 employees.

Advocate and Aurora Health Care expect the combined health system to serve almost three million patients annually and bring in $11 billion in combined annual revenues.

Advocate already reports over $4 billion in net revenues (net patient revenue plus other income), according to data from Definitive HC, while Aurora Health Care has over $3.5 billion in net revenues.

The combined health system will be run by a single Board of Directors with an equal number of Advocate and Aurora Health Care members. Aurora Board Chair Joanne Disch will head the Advocate Aurora Health Board of Directors during the first two years, after which Advocate Board Chair Michele Richardson will chair for the following two years.

The new health system will also keep both headquarters in Illinois and Wisconsin.

Using the combined resources of the two large health systems, the co-CEOs Skogsbergh and Nick Turkal, MD, current President and CEO of Aurora Health Care, intend to improve patient access to care, as well as achieve greater scale and efficiencies, as the combined health system improve care delivery.

Increasing scale and efficiencies may be key in the current healthcare landscape. As reimbursement rates fall and payers and providers move to value-based reimbursement, hospitals and health systems must decrease their costs while simultaneously improving care quality to succeed under new payment models.

Achieving economies of scale is a critical strategy for realizing decreased costs and improved care quality, according to about 29 percent of hospital executives.

Hospitals and health systems can see potential savings between 15 and 30 percent through greater scale, a 2016 Strategy& report stated. Although the analysis also found that most health systems did not see the financial gains after taking on other care sites.

Skogsbergh and Turkal, however, remain optimistic that the hospital merger deal with leverage the resources and strengths of the two large health systems to improve healthcare.

 “Our merger represents a tremendous opportunity to elevate the strengths of two great organizations to shape a better future for those we serve,” stated Turkal. “We are excited to move forward on our commitment to leading the change and building a model of healthcare that is truly transformational.”