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Northwestern Memorial Hospital
Northwestern Memorial

Northwestern Memorial, Cadence merger moves forward

By Bob Herman
Posted: August 27, 2014 - 3:45 pm ET

Northwestern Memorial HealthCare and Cadence Health ratified final terms of their merger Wednesday, creating a Chicago-area health system with nearly $3 billion in annual revenue.

The Illinois Health Facilities and Services Review Board approved the merger application in July after the two groups publicly entered discussions in March. The combined organization, which will retain the Northwestern Memorial HealthCare name and be branded under Northwestern Medicine, begins operating on Sept. 1—the start of Northwestern's 2015 fiscal year.

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The new integrated delivery system will include four acute-care hospitals, giving Northwestern a bigger presence in the well-insured Chicagoland suburbs that are dominated by other systems. Advocate Health Care, headquartered in Downers Grove, Ill., is the largest system in the area with 11 hospitals.

Northwestern is primarily known for its 885-bed academic medical centers in Chicago's Streeterville neighborhood not far from its tony Michigan Avenue shopping district. It will now control 344-bed Central DuPage Hospital in Winfield, Ill., and 159-bed Delnor Hospital in Geneva, Ill. Northwestern already owns a hospital in Lake Forest, Ill., which is being rebuilt and will include 114 beds. Cadence's hospitals will not be renamed for the time being.

More than 19,500 employees and 4,000 physicians will be part of the new system. Northwestern said it does not expect any layoffs as a result of the merger.

“Cadence is an ideal health system to combine with as their vision, mission and values are very similar to ours,” Northwestern CEO Dean Harrison said in a release.

Harrison will keep his role as CEO of the system. Cadence CEO Mike Vivoda will become Northwestern's western region president. John Orsini, Cadence's chief financial officer, will be Northwestern's new CFO.

For Cadence, the deal offered a second chance to find a partner. Merger talks with Rockford (Ill.) Health System collapsed in January and both systems declined to say what derailed negotiations.

Northwestern and Cadence have maintained high levels of profitability despite a nationwide trend of compressed margins. In fiscal 2013, Cadence reported an operating margin of 11%, while Northwestern's hit 7.7%—both well above the national average.

Follow Bob Herman on Twitter: @MHbherman

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