Federal regulators and their counterparts in Illinois have greenlighted the proposed merger between Advocate Health Care and Aurora Health Care, paving the way for their $10.7 billion cross-state system to become a reality.
The Federal Trade Commission signed off on the proposed deal last week, according to the two systems, and the chair of the Illinois Health Facilities & Services Review Board approved the deal Feb. 1. The merger, which would unite comparably sized systems to form the country's 10th largest not-for-profit hospital system, still needs Wisconsin regulators' OK.
"We are excited to move one step closer to bringing our two great organizations together to reimagine the possibilities of health for those we serve," the two health systems wrote in a joint statement on Thursday. "Advancing through the FTC's review process was a key milestone in addition to securing regulatory approval in Illinois. We look forward to the final step of receiving approval in Wisconsin before our anticipated closing this spring."
The systems are still waiting on approval from the Wisconsin Office of the Commissioner of Insurance, Aurora spokeswoman Tami Kou wrote in an email. A spokeswoman for that office did not return a request for comment.
Kathy Olson, chairwoman of the Illinois Health Facilities & Services Review Board, approved the ownership change for all 15 Advocate hospitals in Illinois on Feb. 1, said Mike Constantino, the board's senior reviewer. A 2015 statute change allows the board chair to approve change of ownership applications assuming the requesting parties provided all necessary information, Constantino said.
Downers Grove, Ill.-based Advocate and Milwaukee-based Aurora announced their proposed union in early December 2017 amid a whirlwind eight-day span in which five such mega-mergers were announced. The combined entity would have more than 3,300 employed physicians, 500 outpatient locations and 70,000 employees.
The announcement came after a judge rejected Advocate's proposed merger with NorthShore University HealthSystem because of concerns about their overlapping service areas. The FTC said the deal would have given the resulting entity 60% market share in Chicago's North Shore suburbs.
Deals between systems without overlapping coverage areas tend to fare better from a regulatory standpoint, said Anu Singh, a managing director with the consulting firm Kaufman Hall. In the current regulatory environment, however, Singh said there's no single defining feature that guarantees a proposed deal will pass muster. Each one is examined on a case-by-case basis.
From a strategic standpoint, Singh said the Advocate-Aurora merger makes sense for several reasons. First off, geographic diversity is helpful when a system encounters regulatory or reimbursement challenges in one of the states it operates in.
"One market can be up, one can be down," Singh said.
Additionally, the two systems would be able to share intellectual capital and other resources between each other, he said. And the merger would yield a larger patient base, making investments in specialized procedures or new technologies easier to justify.
"When you talk about bringing something to the community that, because of the size of the combined footprint, allows you to do something it didn't do before, you are providing more to your communities," he said. "You are providing more to patients."