- Two Chicago area health systems are considering an official hospital merger after four years of engaging in a strategic partnership.
Palos Health and Loyola Medicine jointly announced on Jan. 21, 2019 that the health systems signed a non-binding letter of intent to “explore opportunities to build upon their strategic partnership that began in 2015.”
The health systems intend for the recent announcement to result in Palos Health and its affiliate organizations to expand Loyola Medicine’s reach into the south and southwest suburbs of Chicago.
Loyola Medicine is a quaternary care system located in the western suburbs of Chicago. The system includes Loyola University Medical Center (LUMC), Gottlieb Memorial Hospital (GMH), MacNeal Hospital, and other care sites offering primary and specialty care services from more than 1,750 physicians.
The health system is part of Trinity Health, one of the largest health systems in the country with 94 hospitals across 22 states.
Loyola Medicine has been working with Palos Health, a fully integrated community-based health system in neighboring Chicago suburbs, for several years. The health systems have engaged in an academic affiliation that permitted Palos Health to expand its clinical services.
Through the strategic partnership, the health systems have implemented a telestroke program that allowed stroke specialists from Loyola Medicine to treat patients at Palos Hospital, Palo Health’s 425-bed hospital outside of downtown Chicago.
The potential hospital merger deal would build on the strategic partnership to bring more patient-centered care to individuals in Chicago.
“We are operating in an incredibly dynamic healthcare landscape,” Terrence Moisan, MD, President and CEO of Palos Health, stated in the announcement. “Over the past few years, we’ve steadily evolved our institution to not only respond to these changes, but to capitalize and drive forward in a position of strength.”
“Our patients are our priority at Palos Health and one way we have maintained this commitment is by seeking strategic partnerships to best serve our communities,” he continued. “By fully integrating with Loyola Medicine, we will enhance our clinical strength, increase our flexibility and provide our community with more comprehensive care across an expanded region.”
In response, Shawn P. Vincent, President and CEO of Loyola Medicine and President of Trinity Health’s Illinois region stated, “We have built a strong relationship with Palos over the years. Many physicians at Palos Health trained at Loyola University Medical Center and we have been providing tertiary care to Palos patients in the south and southwest suburbs for decades. A strong partnership with the exceptional clinicians at Palos will provide greater value to the members of our communities.”
After signing the non-binding letter of intent, the health systems are now engaging in the due diligence process. Officials from the systems anticipate the process to take several months and the systems did not disclose the terms of the letter of intent.
Although, the announcement stated that Palos Health will continue to operate as a non-profit corporation.
Hospital merger and acquisition activity is still going strong. 2017 was a record year for hospital M&A activity. Consulting firm Kaufman Hall recorded 115 merger and acquisition transactions that year, the highest number in recent history.
2018 did not have the volume of hospital mergers and acquisitions as the previous year. However, the value of the 90 announced transactions in 2018 hit a record high. The average size in revenue of the sellers in hospital M&A deals grew at a compound annual growth (CAGR) rate of 13.8 percent since 2008, reaching $409 million a decade later.
“What we’re seeing is a move toward strategic growth, driven in part by the need to acquire expertise and resources to manage the industry-wide changes facing hospitals and health systems,” stated Anu Singh, Managing Director at Kaufman Hall. “These include changes in payment and care delivery models and the push for greater value, but also the emergence of new competitors that bring significant capital resources and strong capabilities in both digital technology and consumer experience to healthcare.”
Notably, non-profit provider organizations are becoming increasingly interested in hospital mergers and acquisitions. Non-profit systems were the acquirer in 75 percent of hospital M&A deals in 2018.
“Anticipate additional acquisitions and partnerships between and among for-profit and not-for-profit systems and converging strategies in pursuit of operational efficiency, clinical excellence, and targeted growth,” Kaufman Hall experts stated.