The price tag is on the higher end of comparable deals, reflecting the increased value of a specialty practice that is highly profitable to hospitals, experts say.
“Cadence is being aggressive in this marketplace and wants to be a real player,” said Adam Lynch, vice president at Chicago-based Principle Valuation. “They want to be considered one of the top-tier health systems in the Chicagoland area, and right now they have the capacity to do so.”
Cadence, with about $770 million in total operating revenue for the nine months ending March 31, is also a finalist to partner in some way with Elgin-based Sherman Health Systems. The other finalist is Oak Brook-based Advocate Health Care Network, a 12-hospital system.
The transaction includes not only OAD specialists, nurses and staff, but also substantial real estate assets, which helped boost the price.
The deal includes an outpatient surgery center in Warrenville and medical office buildings in Naperville and Wheaton, according to a pair of applications Cadence filed earlier this month with the Illinois Health Facilities and Services Review Board, which regulates the health care industry to prevent duplication of services and must approve the change in ownership.
The purchase price of $75.4 million was disclosed in the applications.
The deal would bolster the growing Cadence Physician Group, which had revenue of $55.9 million in 2011, making it the 15th largest practice in the Chicago area, according to Crain's annual ranking, published April 23.
Cadence CEO Michael Vivoda, who assumed to the top post on July 1, previously played a key role in expanding the doctors' group as president of Central DuPage Hospital and executive vice president of Cadence.
The practice has swelled by nearly 50 percent in the last two years, to about 200 physicians, including about 30 doctors who are not employed by Cadence but are aligned with the group through partnerships with other hospital systems.
Mr. Vivoda was not available for an interview on Monday, but in an Aug. 3 news release announcing the deal, he said: “We are committed to developing the region's premier orthopaedic program. The potential acquisition of OAD is a significant milestone.”
Lenard LaBelle, a sports medicine physician at OAD Orthopaedics, said in the release that given the changing health care environment, the practice chose Cadence “as a strategic partner” to boost its ability to provide efficient, quality care, and to retain jobs.
“We look forward to an even better future as a combined entity,” Dr. LaBelle said in the statement.
Both deals are slated to close on Mar. 31, 2013, documents filed with the state show.
Founded in 1981 as a solo practice, OAD has grown to offer services at seven west suburban sites. The practice specializes in physical rehabilitation, sports medicine, joint replacement and work-related injuries.