Advocate CEO Jim Skogsbergh and NorthShore CEO Mark Neaman, who will serve as co-CEOs of the new system, said recent consolidation in the Chicago-area market—such as Northwestern Memorial HealthCare and Cadence Health, and Adventist Midwest Health and Alexian Brothers Health System—arises from longstanding local fragmentation.
The renamed Advocate NorthShore Health Partners will have 15 acute-care hospital campuses, a children's hospital and one of the area's largest groups of employed and affiliated physicians. Many of those hospitals and doctors are located throughout the Chicago area's affluent north, west and southwest suburbs. Both systems have strong balance sheets and credit ratings.
But healthcare executives realize financial strength now does not guarantee stability in the short-term future, as payments from federal, state and commercial insurers have mostly stagnated or declined. Providers have shifted their focus away from treating as many patients as possible and toward population health and value-based payments.
Advocate and NorthShore, with this merger, are breaking free of their legacy identities and achieveing that genuine transformation, said James Blake, a managing director at financial consulting firm Kaufman Hall.
This shift in how to care for patients, spurred in part by the healthcare reform law, is a big reason why mergers have proliferated over the past few years, said Jim LeBuhn, an analyst at Fitch Ratings. He argues that the Advocate-NorthShore merger confirms that the pace of health system consolidation is likely to pick up even more, especially in other major metro areas.
For some regions, it already has. Beaumont Health completed its three-system merger this month, creating one of the most extensive provider organizations in suburban Detroit. In Dallas last year, Baylor Health Care System and Scott & White Healthcare combined to form the largest not-for-profit system in Texas. And in New York City, Mount Sinai Medical Center and Continuum Health Partners consummated a deal that created Mount Sinai Health System, one of the largest private health systems in the area.
In each of those mergers, and now with Advocate NorthShore, population health has been cited as a major factor. Advocate has aggressively pursued this strategy in the past three years in the form of accountable care organizations and clinically integrated physician groups. Advocate has a Medicare Shared Savings Program ACO as well as an ACO contract with Blue Cross and Blue Shield of Illinois. Advocate and NorthShore also recently created accountable care entities to serve Medicaid beneficiaries in Illinois. Together, the new system will cover about 660,000 people through some type of ACO, Skogsbergh said.