Powerhouse Northwestern Memorial HealthCare and smaller Centegra Health System plan to marry after all.
The nonprofit health systems, which announced their courtship more than two years ago and have delayed their trip down the aisle more than once, have asked Illinois regulators for permission to merge. Centegra's three northwest suburban hospitals would join Streeterville-based Northwestern, a seven-hospital system known as Northwestern Medicine, according to new applications filed with the Illinois Health Facilities and Services Review Board. The board decides the fate of health care projects in the state to avoid duplicating services.
"The proposed transaction will create a strong and effective long-term relationship between NMHC and Centegra and will ensure continued achievement of both system's charitable missions," one of the applications said.
A Northwestern spokesman said the move is the next milestone in discussions, declining further comment. A Centegra spokeswoman did not immediately comment.
Getting Illinois regulators' blessing to merge comes on the heels of a stern warning from Fitch Ratings to Centegra.
"If the transaction is further delayed or terminated, Fitch expects significant rating pressure for Centegra with the consideration for a multi-notch downgrade," the rating agency wrote in a May 2 report.
Centegra has been hustling to stop a financial hemorrhage. Saddled with nearly $400 million in debt (the system opened a new hospital in Huntley in 2016), Crystal Lake-based Centegra suffered a $62.3 million operating loss in 2017 and has shed employees and outsourced hundreds of jobs to cut costs. The system projects a rosier picture, ending the 2018 fiscal year in June at least $30 million in the red.
Northwestern, on the other hand, is one of the most affluent health systems in the region. It had $4.83 billion in revenue last year and has a national reputation for top-quality treatment.
A Northwestern-Centegra combination would be the latest local deal as health systems race to partner up. They're increasingly financially squeezed by everything from rising drug prices to patients who skip out on paying their medical bills.
Advocate Health Care, one of Centegra's fierce rivals, recently went across the Wisconsin border to combine with Milwaukee-based Aurora Health Care. Their union created the nation's 10th-largest nonprofit health system, with 27 hospitals. Smaller deals have happened, too, such as Loyola Medicine, an academic medical center in west suburban Maywood, acquiring nearby MacNeal Hospital in Berwyn.
Still, not every potential merger works out. Last month, Rush, a three-hospital academic health system anchored by Rush University Medical Center on the Near West Side, and Little Company of Mary Hospital & Health Care Centers, an independent hospital in south suburban Evergreen Park, called off their deal. A few weeks later, two top leaders at Little Company announced their retirements.
As for Northwestern and Centegra, no cash would change hands. Northwestern would become Centegra's parent and have the power to govern, direct and oversee Centegra. The deal is slated to close on Sept. 1.
"Northwestern, Centegra to tie the knot after lengthy courtship" originally appeared in Crain's Chicago Business.