A challenge to Lurie's grip on Chicago pediatric market?

An agreement between Alexian Brothers Health System and Loyola University Health System to expand pediatric services likely will increase competition for Chicago's dominant children's hospital.

Arlington Heights, Ill.-based Alexian Brothers and Maywood,Ill.-based Loyola want to team up to bolster the number of services they can offer, which might keep patients from trekking downtown to nationally renowned Ann & Robert H. Lurie Children's Hospital of Chicago, which specializes in treating the sickest children.

For Alexian and Loyola, their effort involves growing their pool of pediatric specialists, such as experts in cancer and cardiology. Pediatric specialists are hard to come by and typically gravitate toward large children's hospitals like Lurie that specialize in providing complex care, experts say.

Teaming up “gives us the ability to have a deeper bench, so to speak, in each of the subspecialties so that we can provide greater access to patients,” said Daniel Post, a senior vice president at Loyola and chief business development officer.

“It's competition. There's no doubt about it,” said Doug Fenstermaker, a Chicago-based vice president of healthcare at Warbird Consulting Partners LLC. “There will be fewer patients going to Lurie” if Alexian Brothers and Loyola are successful, he said.

A spokeswoman for Lurie declined to comment.

Their task won't be easy.

Lurie is the leading pediatric hospital in the Chicago area, with 24% of the market in 2012, according to a March report from Fitch Ratings. No other hospital had more than 11%. Of Lurie's large medical staff, about 450 are subspecialists. The facility has two major selling points for patients and physicians alike: its two-year-old, gleaming 23-story building in downtown Streeterville, and its academic partnership with Northwestern University's Feinberg School of Medicine, where physicians conduct research.

Lurie already has been broadening its reach in the suburbs, affiliating with hospitals across the area to keep some pediatric patients close to home while bringing the sickest children downtown.

But there's room for more competition.

Alexian Brothers and Loyola “probably think that people in their market and maybe north … would stop (going downtown for care) if they developed a strong reputation, or a reputation approaching that of Lurie Chlidren's,” Mr. Fenstermaker said.

Alexian Brothers and Loyola, both Catholic systems, announced yesterday that they had signed a letter of intent, effective in September, to affiliate and expand pediatric services. Alexian Brothers has five hospitals in the northwest suburbs, while Loyola has two hospitals in the western suburbs.

Combined, Alexian Brothers and Loyola, an academic medical center, have about 75 pediatric specialists. They've had a long-term relationship, during which Loyola specialists have provided neonatal services at Alexian Brothers hospitals.

Last year, Alexian opened a 126-bed hospital dedicated to women and children on its St. Alexius Medical Center campus in Hoffman Estates. Loyola has about 100 pediatric beds, including 50 dedicated to the neonatal intensive care unit for the sickest babies.

The systems plan to beef up outpatient access. Those plans are still being developed, but they could include expanding existing facilities or opening new ones.

Regardless of any local competition, the affiliation is “more about being prepared for a future that's moving more and more toward (outpatient care) and population health,” said Patricia Cassidy, Alexian Brothers senior vice president and chief strategy officer. “It's not really about Lurie. It's more about how do we come up with the best model of care to offer in the community for kids who have either chronic conditions or severe acute illness.”

Joint operations allow both systems to gain scale, part of a widespread trend among hospitals and physician groups to move into managing the health of large populations of patients. They're being financially rewarded by insurers and government payers for keeping patients healthy while lowering medical costs, and penalized if they don't.

"Fighting over children: Will deal loosen Lurie's grip?" originally appeared in Crain's Chicago Business.