Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • MORE +
    • Contact Us
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Mergers & Acquisitions
December 02, 2022 01:37 PM

Advocate Aurora and Atrium complete merger

Alex Kacik
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    advocate-main.jpg
    Advocate Health

    Advocate Aurora Health and Atrium Health have completed their merger, creating a health system with more than $27 billion in annual revenue, 67 hospitals and nearly 150,000 employees.

    Advocate Health, the name for the combined nonprofit organization, includes 40 hospitals from Charlotte, North Carolina-based Atrium and 27 from Advocate Aurora, which is jointly headquartered in Downers Grove, Illinois, and Milwaukee. The transaction, announced Friday, ties together facilities in Alabama, Georgia, Illinois, North Carolina, South Carolina and Wisconsin. It is the latest in a series of regional health system mergers.

    The Illinois Health Facilities and Services Review Board signed off on the deal last month after initially denying it in September, when board members voiced concerns about the control of the 10 affected Illinois hospitals. The office of Illinois Attorney General Kwame Raoul (D) said it had no comment on the merger. The Federal Trade Commission declined comment. 

    The office of North Carolina Attorney General Josh Stein (D) said Friday the state will take no action because it lacks “legal basis within the office’s limited statutory authority to attempt to prevent the Atrium-Advocate Aurora transaction.”

    Industry consultant Paul Keckley said the done deal is no surprise after getting the go-ahead from the Illinois board. The new system moves into the integration phase, and Keckley said the combined organization could align with similar systems in the future, potentially creating a larger holding company with individual legacy operations.

    “Go big or get out. I mean, that’s been the rule even pre-pandemic,” Keckley said. “There’s a lot of catching up that folks have to do, and I think the bigger folks have an advantage in that their balance sheets will at least give them time to make the transition. A lot of the smaller players can’t do it.”

    While Atrium estimated it will invest $25 to $50 million in the coming years to expand services in underserved communities in North Carolina, the health system can and should do more, said Stein, adding he is concerned about the combination’s possible effects on healthcare access.

    Stein said Advocate Health told him it will maintain current service levels in critical departments, provide indigent care, ensure no patients are denied care due to an inability to pay and provide care to Medicaid and Medicare recipients without discrimination.

    “Too often, when one hospital swallows up another, patients end up paying more and getting worse care,” Stein said in a statement. “Currently, the law limits my office’s authority to protect patients’ health care access, quality, and costs. We can do better, so I will be working closely with leaders in the legislature to address this health care loophole.”

    Advocate Health said the merger makes it the fifth-largest nonprofit health system by revenue in the country. Its headquarters is Charlotte. The Advocate Health Care, Atrium Health and Aurora Health Care brands will continue to be used in their respective local communities, with Wake Forest University School of Medicine serving as the academic anchor.

    The merged company's  board will be evenly split between the two organizations. Atrium Health CEO Eugene Woods and Advocate Aurora CEO Jim Skogsbergh will serve as co-CEOs for the first 18 months, after which Skogsbergh is to retire. Additional leadership announcements could come as early as next week but no Advocate Aurora executives will relocate to Charlotte, a spokesperson said.

    Through nine months of Advocate Aurora’s fiscal year that ended Sept. 30, the health system reported $58.9 million in operating income on $10.77 billion of revenue, down from $448.8 million in operating income on $10.3 billion of revenue in the year-ago period. Similar to other systems around the country, its investment income plummeted, and labor expenses surged. Investment income dropped from more than $1 billion to a nearly $1 billion loss over that span, while salary, wage and benefit expenses jumped roughly 13%.

    Atrium did not provide its third-quarter financial statement.

    Health systems may turn to mergers and acquisitions to mitigate expense increases, reimbursement pressure and investment income declines. Those mergers are increasingly between large regional systems in different states as the number of smaller systems dwindle and many local markets are already highly consolidated. The Federal Trade Commission is often hesitant to challenge cross-market mergers because federal antitrust law focuses on in-state hospital mergers.

    Sioux Falls, South Dakota-based Sanford Health and Minneapolis-based Fairview Health Services signed a letter of intent Nov. 14 to form a $14 billion health system. Salt Lake City-based Intermountain Healthcare and Broomfield, Colorado-based SCL Health formed a $14 billion organization in April that operates 33 hospitals in seven states.

    “In this environment, there is no use in pursuing tie-ups that are going to be challenged or bring more of the same problems you have in your own geo-locked market,” said Nathan Ray, a partner at consulting firm West Monroe's healthcare M&A practice. “Finding these cross-market, cross-country collaborations and actually pulling value out of them is probably the new signature of how this consolidation will continue.”

    Some of that value stems from improving access by adding physicians and services, upgrading equipment and improving their negotiating leverage with payers, Ray added. Advocate and Atrium said in a news release that Advocate Health will improve outcomes, access and affordability, advance population health, enable career advancement and achieve carbon neutrality by 2030. It also plans to establish a new institute of health equity in Milwaukee, seeking input from local and national partners to meet the needs of the community.

    While health system executives claim that hospital mergers will reduce costs, healthcare economists counter that these transactions don’t typically translate to more cost-effective care. A recent Modern Healthcare analysis of hospital operating costs after an acquisition showed that the results were mixed, at best.

    Mergers like Advocate and Atrium appear more palatable to regulators because of minimal geographic overlap, but operational synergies may be limited to clinical and back-office areas, Kevin Holloran, senior director at the ratings agency Fitch Ratings said in a recent report.

    “Longer term goals for Advocate Aurora Health and Atrium Health, however, may not be focused on cost-savings, but rather remedying long-standing flaws in the healthcare system writ large, such as access and healthcare disparities based on ethnicity and socioeconomic status,” he wrote.

    Advocate Aurora said this week that its hospitals in Wisconsin will increase prices next year by up to 5.5% to cope with rising labor, drugs and supply costs. Prior to that announcement, industry observers were concerned that Advocate Health would use its market power to force insurers and large multistate employers to pay inflated prices. Advocate Aurora hospitals in Wisconsin have consistently charged commercial insurers higher-than-average prices since Advocate Health Care and Aurora Health Care merged in 2018, according to a Modern Healthcare analysis of data from the not-for-profit research firm RAND Corp.

    Two weeks after announcing the merger plan in May, Advocate Aurora was hit with a federal lawsuit in Wisconsin alleging its all-or-nothing contract provisions with insurers stymie competition and allow the health system to raise prices. The case is ongoing.

    Caroline Hudson contributed.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Sanford Fairview merger
    Minnesota AG asks Sanford, Fairview to delay merger
    deal_merger.png
    Elevance Health to acquire Louisiana Blue Cross company
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Modern Healthcare Alert: Sign up for this breaking news email to be kept in the loop as urgent healthcare business news unfolds.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • MORE +
      • Contact Us
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing