Elgin area hospitals merge, expand and battle in 2012
By Dave Gathman firstname.lastname@example.org January 5, 2013 3:38PM
Sherman Hospital moved to it's new state-of-the-art facility in 2009 featuring a 15-acre geothermal lake to heat and cool the facility. Sherman Health Systems announced partnership with Advocate Health Care in October. October 23, 2012 | Sun-Times Media~File Photo
Updated: February 7, 2013 6:14AM
With medical costs going through the helicopter pad, more and more hospital services going the outpatient route, Obamacare looming and government reimbursements dropping, 2012 was a tumultuous time to be in the hospital business. And nowhere more so than the Fox Valley.
The year saw a new hospital in Huntley approved, a proposed new hospital in Crystal Lake voted down, Sherman Hospital in Elgin tentatively deciding to sell itself to a chain, Delnor Hospital in Geneva getting a new corporate name a year after it merged with Central DuPage Hospital in Winfield, and the chain that already controls Provena Saint Joseph Hospital in Elgin renaming itself after merging with another chain.
Finally a decision
In the biggest news, the long-debated plans to build new hospitals in Huntley and Crystal Lake finally got a decision — or will it be final? — from the Illinois Health Facilities and Services Review Board. The decision was that McHenry County-based Centegra Health Systems can build a 128-bed, $233 million hospital at Reed and Haligus roads in Huntley. But Wisconsin-based Mercy Health System will not get a “certificate of need” to build a 70-bed, $115 million hospital in Crystal Lake.
The two proposals had been simmering for years — in the Crystal Lake case, for some 10 years. Huntley and Crystal Lake officials, business leaders, fire chiefs, doctors and just plain residents hoping for a shorter ambulance ride had campaigned vociferously to get a state “certificate of need” for their local project. Several times they filled hearing rooms up to 50 miles away with hundreds of standing-room-only people ready to testify and tote signs. Centegra says 16,000 Huntley-area people wrote or signed letters urging the board to vote yes.
The contest often was pictured as an either-Huntley-or-Crystal Lake thing, with the assumption that southern McHenry County has only enough business to support one new hospital. Testimony often focused on the implied inferiority of the other proposed new hospital, or of the chain that wanted to build it.
But for the existing hospitals that already serve southern McHenry County and nearby areas such as Hampshire, Pingree Grove, Algonquin and Lake in the Hills, both plans posed a threat to their patient flow.
Sherman officials banded together with Advocate Good Shepherd Hospital in Barrington and St. Alexius Medical Center in Hoffman Estates to argue that they were already serving both Huntley and Crystal Lake just fine. They said either new hospital would hurt them financially, forcing employee cutbacks and limiting their ability to provide free care for the needy.
When the state board made its first ruling, in June 2011, members bought that argument. The board voted 8-1 that it “intended to deny” the certificates of need for both Centegra and Mercy, on the grounds that population growth had slowed in McHenry County and the existing hospitals already were operating below capacity.
Mercy responded by trimming its Crystal Lake plan, which at that time had been the same size as Centegra’s Huntley one, to a smaller and cheaper size. But when the state board met to make its final decision in December 2011, with one member absent, it rejected the Mercy plan 6-2; and split down the middle — which counted as a rejection — on the Centegra plan, with four votes yes, four votes no.
It seemed like the issue had been settled. But lawyers who found a clerical error persuaded a judge to set aside both decisions and order the planning board to reconsider. That started a new round of lobbying and hearings. Now with all nine members attending, the board voted 6-3 in July to approve the Centegra Huntley plan and voted 6-3 in September to deny the Mercy Crystal Lake plan.
As a new year dawns, a possibility remains that the state-approval issue could be reopened yet again. Sherman and Advocate — now joined by former enemy Mercy as a strange bedfellow — have filed a challenge in Will County circuit court asking a judge to cancel the new state decisions on grounds that the board violated its own rules.
Meanwhile, Centegra Senior Vice President Susan Milford said last week that “we plan to break ground in Huntley in late summer or early fall of 2013, and we’re still on target to open in the winter of 2015-2016.”
Sherman Health Systems worked together with Good Shepherd Hospital-owner Advocate Health Systems to fight the Huntley and Crystal Lake plans. And in October Sherman and Advocate announced they likely will soon be working together a lot more closely.
Sherman CEO Rick Floyd and Chairman Rick Jakle announced that Sherman had decided to “pursue a partnership” with Advocate, a 12-hospital chain based in Oak Brook that’s affiliated with the Evangelical Lutheran Church and the United Church of Christ, and that also includes the likes of the Advocate Lutheran General super-hospital in Park Ridge.
Floyd and Jakle said exact details of the new relationship were yet to be arranged. But the announcement probably means that Sherman will sell itself and its affiliated clinics and doctors’ offices to the Advocate chain, rename itself “Advocate Sherman Hospital,” and combine some of its services and facilities with those already owned by Advocate.
Sherman spokeswoman Tonya Luchetti-Hudson said last week that “we are still in the due diligence period of the integration process” and Sherman officials still expect the merger to become reality sometime between May and July of this year.
Before the October announcement, Sherman had undergone months of wooing.
Two years ago, a “Future of Sherman Task Force” invited 11 other hospitals and chains to talk about possible partnerships. That was winnowed down to five chains, who were asked for proposals. In July of last year, Sherman officials announced that the choice had come down to two finalists — Advocate and Cadence Health, which includes Delnor Hospital in Geneva and Central DuPage Hospital in Winfield. The Sherman board in October voted unanimously in favor of Advocate.
Jakle explained that Advocate has more experience than Cadence with integrating new members, that it already uses the same data systems as Sherman Health, and that Sherman-affiliated doctors preferred what they heard from Advocate’s doctors.
The Sherman-Advocate marriage will pound another nail into the coffin of that thing called “the independent local hospital.” If the merger goes through (and it still could be called off by either side), it will leave just two hospitals in the Chicago area, Edward in Naperville and Kishwaukee in DeKalb, that are not part of a bigger chain.
Such mergers allow hospitals to eliminate expensive duplicate facilities, to increase their bargaining clout when dealing with insurance companies and firms that sell supplies, and to help satisfy the kind of “patient outcomes” measurements that are included in the Health Care Affordability (Obamacare) Act.
In Sherman’s specific case, the hospital also has been struggling with a $273 million debt, most of it left over from construction of its ultramodern 255-bed Randall Road building four years ago. And now its already fairly low bed-occupancy rate faces the challenge of new competition for patients from the Centegra Huntley Hospital.
New Provena name
Elgin’s other century-old, general-purpose hospital, Saint Joseph, has been a part of the Provena Health System chain for several years. Provena was one of the 11 possible partners approached by Sherman Health when Sherman’s board decided to seek possible merger partners. But Provena didn’t make it into Sherman’s five finalists because, Jakle explains, Elgin already has one Catholic hospital and the board felt strongly that “no religious figure will dictate how we do health care here.”
Saint Joseph did get one change, though. In November 2011 Provena merged with another Catholic hospital chain, Resurrection Health Care, to form a group of 12 hospitals and 28 other facilities controlled by five orders of nuns. And in February the combined Provena-Resurrection organization announced it had chosen the new name “Presence Health.” So as the new year began, the Saint Joseph staff was in the process of starting to rename and rebrand itself as “Presence Saint Joseph Hospital.”
New Delnor name
The parent of the Tri-Cities’ only general-purpose hospital also is getting a new name, though the individual hospital probably will continue to refer to itself as just “Delnor Hospital,” a name that can be traced back to St. Charles philanthropist Dellora Norris.
In March 2011 the then-independent Delnor merged with Central DuPage Hospital in Winfield. In 2012 the combination announced that it had chosen the name “Cadence Health” to use for its clinics and doctors’ offices, and in talking about joint operations between Delnor and CDH.