Sherman Hospital to join with Advocate Health Care
By Dave Gathman firstname.lastname@example.org October 23, 2012 9:24AM
Sherman Health Systems in Elgin announced Tuesday, Oct. 23 ts plans to pursue a partnership with Advocate Health Care. File photo | Sun-Times Media
Sherman Health Systems
Named the fifth most beautiful hospital in the U.S. by Soliant Health, the 255-bed Sherman Hospital features all-private patient rooms, a 15-acre geothermal lake to heat and cool the facility, an advanced Emergency Department with a Level II trauma center, a spacious Family Birthing Center and Special Care Nursery, a Heart & Vascular Center, a Cancer Center, and a bright and open design to contribute to the healing process. Sherman Health has obtained certification as a Primary Stroke Center, Breast Center and Chest Pain Center, and received a 2011 Silver Award from Illinois Performance Excellence (ILPEX). Sherman Health operates three immediate-care centers in Elgin, South Elgin and Algonquin; Sherman West Court, a skilled nursing and rehabilitation facility in Elgin; and home health services. The system employs more than 2,200 people and has more than 600 physicians on its staff.
Advocate Health Care
Advocate Health Care is the largest health system in Illinois and one of the largest in the Midwest. Advocate operates more than 250 sites of care, including 10 acute-care hospitals, two children’s hospitals, five Level I trauma centers (the state’s highest designation in trauma care), two Level II trauma centers, one of the area’s largest home health care companies, and one of the region’s largest medical groups. The system trains more primary-care physicians and residents at its four teaching hospitals than any other health system in the state.
Updated: November 25, 2012 11:35AM
ELGIN — After persevering as one of the last independent hospitals in northeastern Illinois while almost all those around it merged into ever-bigger chains and networks, Elgin’s Sherman Health System sent an email to its employees Tuesday morning announcing that it intends to “pursue a partnership” with the Oak Brook-based, 12-hospital Advocate Health Care network.
If finalized by sometime next year, the move will make Sherman a corporate sister of such hospitals as Advocate Lutheran General in Park Ridge, Advocate Good Shepherd in Barrington, Advocate Good Samaritan in Downers Grove and Advocate Condell in Libertyville.
Sherman Board Chairman Rick Jakle and President/CEO Rick Floyd said the board’s 13 members voted unanimously on Monday afternoon to send a letter of intent to Advocate agreeing to accept Advocate’s proposal to get together. In doing so, the board rejected a similar proposal from the other finalist in Sherman’s effort to find a big partner — Cadence Health System, which operates Delnor Hospital in Geneva and Central DuPage Hospital in Winfield.
Floyd said the marriage still could be called off by either side, and the letter of intent kicks off seven to nine months of “due diligence,” during which Sherman and Advocate will work out exactly what their relationship will be.
“I wouldn’t use the word ‘merge,’ because that may not end up being an exactly accurate description of our relationship,” Floyd said. “It would be most accurate to say that we intend to join Advocate’s system.”
“Advocate Health Care shares our values and vision for health care in the Elgin area,” Jakle said. “Sherman is pursuing a partnership that will combine the resources of one of the nation’s top community hospitals with one of the nation’s leading health systems. We remain committed to providing the personalized care that our community has come to expect from Sherman.”
If all goes as expected, Jakle said, the marriage is expected to become reality between May and July of 2013.
The marriage is expected to provide cost savings by allowing Sherman to share programs with other Advocate hospitals and take advantage of the buying power of a larger organization, as Sherman gradually works its way out of a $273 million debt, $170 million of which was generated by the cost of building its award-winning new 255-bed central hospital along Randall Road in 2009.
“It’s like any other industry,” said Jim Ciela, a health economist who teaches in Northern Illinois University’s public health program. “If you want to buy gauze or tongue blades, you want to be able to buy a boxcar-full at a time, not a pickup-truck-ful. Payroll, accounting, billing, all lend themselves to economies of scale.”
Multiple locations “allow (a chain) to leverage resources and put the right services in the right place,” said Susan Milford, senior vice president of Crystal Lake-based Centegra Health System. “For example, you want an emergency room within a reasonable distance of every home, so you probably would leave one of those at each hospital.”
But for expensive services that aren’t used by as many people — such as diabetes centers, heart-surgery centers and cancer centers — patients are willing to travel farther, Milford said. “One wound center with a bariatric chamber can serve an entire county.”
Larger size also allows a chain of hospitals to have more clout when negotiating for prices with insurance companies, Milford noted.
Floyd was asked if such consolidations could lead to employee layoffs at Sherman, whose 2,200 workers make it one of Elgin’s biggest employers.
“It’s too early to give a definitive and honest answer to that,” Floyd said. “But we hope that if the expected efficiencies allow a reduction in the work force, that we can do that through attrition or by finding people other jobs within the Advocate system.”
Jakle said the road to the wedding began about two years ago when the Sherman board set up a “Future of Sherman Task Force” to explore the possibility of a merger. The task force asked 11 hospital chains for information — including what was then Provena Health System, the Roman Catholic owner of Elgin’s Provena Saint Joseph Hospital.
“The potential for a partnership with Provena stirred a lot of discussion,” Floyd said. “But ultimately, the proposal that Provena offered didn’t seem as feasible as some others.”
For one thing, Floyd said, “Our board felt that Elgin already has one Catholic organization (Provena Saint Joseph and its affiliated doctors offices and care centers), and that one objective should be to provide a choice for the community, that both organizations should not end up being Catholic.”
But Advocate also has Christian roots. A not-for-profit organization, it is affiliated with the Evangelical Lutheran Church in America and the United Church of Christ. But asked if this means that the new Sherman’s operations will become more religiously based, Jakle said, “Absolutely not. Advocate is a faith-based organization. But no religious figure will dictate how we do health care here. That was important to us.”
After mulling through the 11 possible partners, the Sherman board pared the suitors to five — Advocate; Cadence; Ascension Health, a Catholic chain that recently acquired St. Alexius Medical Center in Hoffman Estates; Chicago’s Rush University Medical Center, which is involved in the Rush-Copley Medical Center in Aurora; and Trinity Health, a large Catholic network based in Michigan.
In July, Sherman went public about what was going on. It announced that Advocate and Cadence had become finalists in the wooing contest and said a decision would come this fall.
“The community would have been served well by either Advocate or Cadence,” Jakle said. “But Advocate has tremendous experience in aggregation, in becoming a system of different hospitals. They’re one of the 10 biggest health systems in the country and have 12 hospitals here in the Midwest. They’re recognized for their clinical integration, and they’re already poised for physician management, which will be an important part of the future of medical care. They also use the same IT platform as Sherman Health, which will save cost.”
Floyd said physicians from Sherman, from Advocate hospitals and from the Cadence hospitals were invited to two forums to meet each other and talk about the procedures and atmosphere in each community. Floyd said the Sherman doctors reported afterward that they preferred Advocate over Cadence.
Sherman and Advocate already have worked together on one project — a joint lobbying and research effort to keep new hospitals from being built in Huntley and Crystal Lake.
The effort was a partial success. After several hearings, the Illinois Heath Facilities and Services Review Board denied permission for Mercy Health System to build in Crystal Lake but did give Centegra a green light to build a hospital in Huntley. Sherman and Advocate have lodged a court challenge to the Huntley decision, which remains pending in Will County’s court system.
The Sherman-Advocate marriage would leave just two independent hospitals in the Chicago area — Edward Hospital in Naperville and Kishwaukee Medical Center in DeKalb.
“We are thrilled about the potential opportunity to partner with an organization that is as strong as Sherman Health,” said Jim Skogsbergh, president and CEO of Advocate. “Advocate and Sherman share numerous core values, including a commitment to health outcomes and patient safety, and a commitment to the communities we are privileged to serve.”