The Rush System for Health and Swedish Covenant Health are exploring a merger, in the latest sign that hospital consolidation has plenty of running room.
Sources close to the hospitals say negotiations are still in the early stages, and there's no guarantee a deal will come together. If Rush and Swedish Covenant do strike a merger, it would combine one of the area's leading academic medical centers with one of the dwindling number of significant independent hospitals in Chicago.
Rush is a three-hospital chain anchored by Rush University Medical Center on the city's Near West Side. Swedish Covenant operates a one-hospital community health network on the North Side. Representatives for both organizations declined to comment on the merger talks.
Rush has stayed relatively quiet on the merger front in recent years while other local chains, like Northwestern Medicine, Amita Health and what's now Advocate Aurora Health, have expanded aggressively through acquisitions. Last year, Rush called off a planned merger with Little Company of Mary Hospital & Health Care Centers for undisclosed reasons. However, it has added a string of new ambulatory care centers, including multispecialty outpatient facilities in the South Loop and Oak Brook, as well as a $473 million Near West Side outpatient center scheduled to open in 2022.
A combination with Swedish Covenant would be "a logical extension of their footprint and a way for them to keep up with the Joneses, so to speak, in Chicago right now," said David Smith, founder of consultancy Third Horizon Strategies. Since 2013, Rush and Swedish Covenant have had a partnership in which cancer patients at Swedish Covenant Hospital gained access to investigational drugs through clinical research trials at Rush.
When asked late last year about Rush's strategy, Michael Dandorph, president of the Rush system and Rush University Medical Center, said the system will continue looking to meet consumers where they are. That could mean growing organically or entering into a partnership with a hospital system, physicians group or technology company, he added.
In addition to a 312-bed hospital in the Ravenswood neighborhood, Swedish Covenant would bring to the merger a 150-member physicians group; medical fitness center Galter LifeCenter; fundraising arm Swedish Covenant Hospital Foundation; and managed care organization Swedish Covenant Physician Partners.
"Swedish has long been an attractive potential partner for health systems in the region," said Dave Gordon, principal at investment banking firm Juniper Advisory.
A merger would give Swedish Covenant access to Rush's deeper pockets and wide-ranging capabilities at a time when many independents are joining larger chains. Rising expenses, intensifying competition, and pressures from government and private insurers to bring down medical costs have made it harder to thrive independently. Swedish Covenant is in the black, but costs are rising almost as fast as revenues, and the nonprofit has had to dig deep for investments such as a $13 million overhaul of its emergency room and a new $1.5 million outpatient center.