Merger of Atrium Health and Advocate Aurora Health suffers setback in Illinois

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An Illinois state board initially voted against the deal, but then agreed to consider it later. Both systems are seeking approval for a merger that would create an organization with $27 billion in annual revenue.

The planned merger of Atrium Health and Advocate Aurora Health, one of the largest hospital mergers proposed in years, has faced a setback in Illinois.

The Illinois Health Facilities and Services Review Board initially voted against the deal, but later agreed to consider the planned merger later, The ChicagoTribune and other Illinois media reported Tuesday. The council said it would allow both systems to submit more information.

Board approval is a necessary step for the deal to move forward. Advocate Aurora operates in Illinois – it’s the state’s largest health system – and Wisconsin.

The two organizations initially hoped to complete the deal on September 30, media reported, so even if the merger is approved, it could take longer than expected.

Atrium and Advocate Aurora originally announced plans to merge in May and form a system with combined annual revenue of $27 billion. Federal and state regulators must approve the deal.

In a statement late Tuesday afternoon, Attorney Aurora said he was surprised by the board’s action but still expects the deal to be approved this year.

“State law requires the Board of Review to approve all applications for exemption certificates that staff determine to be complete,” Attorney Aurora said in a statement. “Our application was deemed complete last month, so we were surprised by today’s delay and will be working with the review panel to answer their questions. Please know that we continue to work with other appropriate regulators and remain confident that our combination is still on track to close by the end of the year.”

Atrium Health said Tuesday the system will continue to work with regulators.

“A number of regulators have requested information for review regarding Atrium Health’s proposed strategic combination with Advocate Aurora Health. The Illinois Board of Directors has indicated that it would like to see additional information, and we will continue to share appropriate information,” Atrium Health said in the statement.

If the deal is ultimately approved, the merged system would operate 67 hospitals with more than 1,000 outpatient sites in six states, with more than 148,000 employees.

Systems said the new organization would be called Advocate Health, but Systems would continue to use the Atrium and Advocate Aurora brands in their local markets. The organization would be based in Charlotte, North Carolina, but systems indicated the merged system would maintain a strong presence in Chicago and Milwaukee.

The Federal Trade Commission has decided to block certain deals with hospitals over the past year. However, the FTC has generally opposed agreements involving health systems that operate hospitals in the same markets.

With the deal planned by Atrium-Advocate Aurora, the two systems are operating in different parts of the company, prompting some analysts to predict the merger would gain federal approval. Atrium Health is based in Charlotte, NC and serves North Carolina, South Carolina, Georgia and Alabama, while Advocate Aurora serves Illinois and Wisconsin.

If the deal is approved, analysts said it could spur other healthcare systems to pursue similar mergers. Systems could seek merger partners in other markets to gain size and scale, while avoiding potential regulatory scrutiny involving agreements between competitors in the same markets.

Some critics opposed the deal, saying it would lead to higher costs for patients.

SEIU Healthcare, which represents more than 90,000 unionized workers in the Midwest, said in August it opposed the deal. The union said it wanted assurances that Chicago-area hospitals would not be closed to preserve profits.

“SEIU Healthcare says the proposed Advocate Aurora Health-Atrium Health merger threatens access to affordable healthcare throughout Chicagoland and in medically underserved communities,” the union said in an Aug. 24 letter to the board. administration of Illinois.

North Carolina State Treasurer Dale Folwell said in May that the Atrium-Advocate Aurora deal was an “ill-advised merger” and urged federal and state officials to examine it closely.

“North Carolina, already home to one of the top five metropolitan markets in the nation with the highest level of healthcare concentration, is no stranger to the adverse effects of consolidation,” Folwell said in a statement. . “Research consistently shows that mergers and acquisitions don’t deliver on the promises of hospital executives, but instead lead to higher costs, reduced access, and the same or lower level of care.”

In announcing the merger, Atrium and Advocate Aurora pledged to invest heavily in improving care for underserved communities. Leaders of the merged system have pledged to spend $5 billion to address health equity and other community needs.

There have been fewer hospital transactions nationwide over the past year. Only 49 hospital consolidations took place in 2021, compared to 79 the previous year. In the first six months of 2022, 25 hospital agreements were announced, according to Kaufman Hall, the consulting firm.

Although there have been fewer transactions lately, transactions have been larger, and Kaufman Hall said that may be a trend at the moment.

About two weeks ago, Michigan-based Trinity Health completed the acquisition of Iowa-based MercyOne, a system with $3 billion in revenue. Trinity had jointly operated MercyOne with CommonSpirit Health, but struck a deal in the spring to buy all of MercyOne’s assets.

Analysts predict the pace of hospital deals will eventually pick up, though the economic slowdown and the possibility of a recession could make it harder to close deals.

Michael Abrams, managing partner of Numerof & Associates, a consulting firm, is a vocal critic of hospital mergers. In a July interview with health director, he said he feared that if regulators approve the Atrium and Advocate Aurora deal, it would trigger more mergers between major healthcare systems. He hopes the FTC will oppose the deal, but he’s skeptical because these systems aren’t in overlapping markets.

“If this doesn’t elicit a response from the FTC, it ultimately opens the door to an ongoing series of mega-mergers carefully designed to not have overlapping markets,” Abrams said in July.

This story has been updated with statements from Atrium Health and attorney Aurora Health.

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