From Crain’s Chicago Business
By Fareeha Ali
October 27, 2014
Two hospital systems in Rockford and southern Wisconsin have agreed
to merge, creating a new nonprofit system that will have a combined
$1.45 billion in revenue.
The announcement today comes
after the boards of Rockford Health System and Mercy Health System
unanimously signed off on the merger Oct. 23, the hospital CEOs said.
The deal could be completed as early as December, pending approval from
the Illinois Health Facilities and Services Review Board. No cash was
exchanged as part of the merger.
Javon Bea, president and CEO of Janesville, Wisconsin-based Mercy Health, will lead the new parent system and sit on its board.
merged system will include five hospitals, more than 550 physicians and
80 outpatient clinics in Illinois and Wisconsin. Rockford Health System
has a 396-bed hospital and a 61-bed rehab center. Mercy has hospitals
in Janesville and Lake Geneva, Wisconsin, and a 65-bed facility in
Harvard, Illinois. Mr. Bea said this partnership adds specialty
pediatric and neonatal care that Mercy does not offer.
Rockford Township-based hospital has about $450 million in revenue
annually, said Kristina DeCoster, a spokeswoman for the health system.
Mercy has more than $1 billion in revenue, according to its website. It
has invested about $220 million in updating its facilities over the past
few years, Mr. Bea said.
Hospitals are increasingly
looking to get bigger as payment models move from the traditional
fee-for-service to systems that rely on outcomes and reward providers
for keeping people healthy. Small facilities have difficulty competing
because they lack the volume to reduce per-patient costs significantly.
Even Advocate Health Care, the state’s largest system, recently announced plans to merge with NorthShore University HealthSystem, the dominant health network in Chicago’s northern suburbs.
Rockford Township-based system has been in talks with larger
organizations for a while, looking for a partner to help bolster the
hospital’s profitability. Winfield-based Cadence Health most recently
looked into merging with Rockford, but the agreement was called off in January. Downers Grove-based Advocate Health Care, the largest hospital system in the state, was interested in adding Rockford Health to its system in 2008, though those talks ended soon after.
makes this partnership different is that we (Rockford Health and Mercy
Health) are geographically contiguous, while the others (Cadence and
Advocate) were not,” said Gary Kaatz, president and CEO of Rockford
Health. “The second difference is that we are sharing the governance
function in this deal and play a key role on the board.”
previous merger talks, Rockford Health was given minimal seats on a
large board of directors, Mr. Kaatz said. The new operation with Mercy
will have a nine-member board of directors that includes four
representatives of each system.