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Any new acquisition targets here could be off-limits for a large system like 26-hospital Advocate Aurora Health due to antitrust concerns. And six-hospital NorthShore likely is focused on its recently announced merger with three-hospital Edward-Elmhurst Health.
Meanwhile, the Rush University System for Health has been expanding into AdventHealth’s west suburban territory. And then there’s Northwestern, which added Palos Health this year.
A growing Catholic chain like Peoria-based OSF HealthCare could look to absorb some of the Ascension-owned hospitals, sources say. In addition to entering the local market last year when it merged with Little Company of Mary Hospital in south suburban Evergreen Park, OSF already runs two former Presence Health hospitals, which it acquired in 2018 just before Ascension scooped up the other 10.
Northwestern declines to comment on such speculation. Advocate Aurora says “it’s not unusual in today’s environment for all providers to be having conversations, but there have not been any formal discussions.” And NorthShore says it’s “always looking at potential opportunities in the marketplace that allow us to provide the highest quality care and services to our patients and communities.” Rush and OSF didn’t respond to requests for comment.
Amita’s owners haven’t indicated that any of the hospitals are up for grabs. In fact, they’ve said very little about the impending separation—including how long it will take to fully unwind the partnership and whether its 52,000-member accountable care organization will remain intact.
However, in an Oct. 21 joint statement, Ascension and AdventHealth said there will be “no disruption to patient care.”
Dwindling patient volumes in recent years have led Amita to consolidate certain service lines at some facilities to save money on surgical equipment, space and staff. While the cost-cutting strategy also is intended to improve care by increasing patient volume at select facilities, it’s unclear what effect the split will have on such changes.
Amita reported about $3.6 billion in 2020 operating revenue—roughly one-quarter of which was attributable to AdventHealth. The 46-hospital chain said in a recent filing that its four Amita hospitals accounted for about 7% of the system’s $12.6 billion in operating revenue last year. Meanwhile, 146-hospital Ascension said in a recent memo to bond investors that its 15 Amita hospitals accounted for about 12% of the system’s $27.2 billion in operating revenue for the fiscal year ended June 30.
Provided the joint operating company made smart operating changes and divested services that weren’t profitable, “they’ve probably created some runway for themselves,” Smith says.
But factor in the time spent integrating 10 Presence hospitals and navigating leadership turnover, followed by the pandemic response, Amita might not have had much time to position itself for the future.
Even so, industry observers agree that many Amita hospitals are appealing acquisition targets for the region’s expanding chains.
“Do I think they’re strong enough to operate on their own? Yes, those are two pretty good organizations that are well-run nationally,” says Brian Sanderson, managing principal of Crowe’s healthcare services group. “It will come down to whether they want to continue the investment in this area.”
AdventHealth operates “in some pretty good payer mix areas and so they were in a position of relative strength prior” to the formation of Amita, Sanderson says. “If the water of mergers and acquisitions is rising, it’s a question of whether the island they felt safe on before has become too cramped.”
In such a case, AdventHealth could look to form a new joint operating company with another faith-based organization here, sources say, pointing to the success of its 25-year-old joint venture with CommonSpirit Health, Centennial, Colo.-based Centura Health. While CommonSpirit’s national office is located in Chicago, the 140-hospital chain doesn’t have any hospitals or clinics in Illinois.
Keith Parrott, who joined Amita as CEO in January 2020, will lead Ascension’s local hospitals and clinics while Thor Thordarson, currently Amita’s chief operating officer, will lead AdventHealth’s local hospitals and clinics.
This story first appeared in our sister publication, Crain’s Chicago Business.
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