https://www.chicagobusiness.com/health-care/big-hospital-combo-works

Crain’s has learned that at least four hospitals—Advocate Trinity Hospital, Mercy Hospital & Medical Center, South Shore Hospital and St. Bernard Hospital—are in talks with the state to create a single system.

Plans are afoot to consolidate financially struggling hospitals that serve Chicago’s poorest residents on the South Side.

Crain’s has learned that at least four hospitals—Advocate Trinity Hospital, Mercy Hospital & Medical Center, South Shore Hospital and St. Bernard Hospital—are in talks with the state to create a single system with one leadership team that includes some combination of inpatient, outpatient and emergency care, as well as skilled nursing. Separately, a private health care consultancy has agreed to buy recently shuttered MetroSouth Medical Center as the first step in a hoped-for combination with other so-called safety-net hospitals.

Both proposals aim to bolster the precarious finances of hospitals that treat large numbers of uninsured and low-income patients on Medicaid. Consolidation could enable the institutions to generate economies of scale, improve bargaining power with insurers, eliminate redundant expenses and cut back duplicative or underutilized capabilities. Bringing the hospitals together also could lead to the centralization of certain services, forcing some patients to seek care farther from home.

Talks are at an early stage and may not lead to a transaction. But all the hospitals are under pressure to transform as inpatient volumes fall and expenses rise. A combination could help the hospitals adapt. Some might become ambulatory centers, professional buildings or skilled nursing facilities. Services like orthopedics and obstetrics could be centralized at certain locations to improve care and save money on surgical equipment, space and staff. It’s unclear whether some facilities would close in the process.

“While we are always talking with our health care colleagues about how we can best work together to address challenges and meet the evolving needs of our patients and neighbors, we haven’t made any decisions,” a representative for Advocate Aurora Health said in an emailed statement. “Our commitment to caring for our communities and transforming health and wellness for our patients remains strong. Our decisions have always, and will always, be guided by what’s in the best interest of our patients and the communities we are so privileged to serve.”

“As a Catholic health ministry supporting the underserved in Chicago, Mercy Hospital & Medical Center is always working with community partners to find cost-effective ways to provide vital services to our patients, but we have nothing to announce at this time,” a hospital representative for Mercy—which is owned by Catholic giant Trinity Health—said in an emailed statement.

South Shore and St. Bernard did not respond to requests for comment.

All four hospitals are operating in the red, with 2018 net losses ranging from $1.3 million at South Shore to $68.3 million at Mercy, according to data compiled by Modern Healthcare Metrics. The hospitals treat a large number of patients on Medicaid, which pays less than Medicare and commercial insurance. Meanwhile, they’re getting less money from various federal and state programs intended to offset the cost of treating patients who can’t pay for care.

St. Bernard CEO Charles Holland Jr. told Crain’s in July that without additional government funding, “we’re going to have to make some difficult decisions. . . .We just cannot continue to go on the way we are.”

Joining forces would enable the hospitals to pool the money they get from various state and federal programs to fund costly transformative initiatives.

The state-led initiative is being driven by the Illinois Department of Healthcare & Family Services, which oversees Medicaid.

“HFS has been and is routinely approached by numerous providers with a variety of ideas seeking to transform to better meet the needs of their communities,” the department said in an emailed statement. “Our department is currently in talks with multiple groups and would provide guidance to any group of providers that came to us with ideas for health care transformation to meet the needs of the community. HFS will also be monitoring closely and engaging directly with community leaders and members to ensure any changes result in expanded care that meets the needs of the communities these hospitals serve.”

Driving a separate, private initiative is Third Horizon Strategies, which has agreed to buy MetroSouth in Blue Island from Brentwood, Tenn.-based Quorum Health for a dollar.

Third Horizon CEO David Smith said he filed articles of incorporation Monday to create an entity called South Side Health, funded by private investors, and—he hopes—government dollars intended for hospital transformation.

“As we build out South Side Health, if other hospitals are successful (in coming together), it will be important to integrate into one system,” Smith said. “At the end of the day, there needs to be one integrated system on the South Side that acts as a financially self-sustaining utility whose sole function is to improve the health that community.”