Presence Health signs letter of intent to join Ascension

September 1, 2017

By BETSY TAYLOR

Presence Health, the 12-hospital Catholic health care system based in Chicago, said on Aug. 22 that it has signed a nonbinding letter of intent to become part of St. Louis-based Ascension through AMITA Health. AMITA Health is a nonprofit joint venture of Ascension's Alexian Brothers Health System and Adventist Midwest Health. The systems did not announce a time frame for the completion of the transaction.

AMITA Health is a nine-hospital system serving communities in western and northwestern suburban Chicago. With 10 hospitals in Chicago and its collar counties and two in Central Illinois, Presence Health operates the largest Catholic nonprofit health system in Illinois. The proposed transaction with Ascension would include 10 of those hospitals.

Ascension's proposed acquisition of Presence Health would more than double the size of AMITA Health, said Mark Frey, president and chief executive of AMITA Health and senior vice president of Ascension Healthcare, and Michael Englehart, Presence Health's president and chief executive. The men spoke to Catholic Health World jointly the day of the announcement. Frey said they began talks about Presence Health joining Ascension not quite a year ago. They said no cash would change hands as part of the deal, and that Ascension would assume Presence Health's assets and liabilities.

Strengthened Catholic presence
Englehart said that when Presence Health began its exploratory efforts related to the system's future, its leadership wanted the system's entities to continue as part of a Catholic ministry moving forward. "Both the board and Presence Health Ministries (the system's public juridic person) are extremely supportive of this path, and (believe) that we're taking all the right steps to survive and prosper," Englehart said.

Cardinal Blase J. Cupich, archbishop of Chicago, noted Catholic health organizations have served the Chicago region for nearly two centuries. He said in a statement regarding the proposed merger that the health systems have "pledged to honor the commitments of the founding communities that built them, and our Catholic values by continuing to offer healing and care for all who come to them in need."

The systems said in a statement that the transaction is intended to strengthen patient care while working to reduce costs and drive value. They said it will increase access to care, expand the physician network and deepen sub-specialization capabilities. Both systems share a commitment to care for the poor, including Medicaid patients, and to provide quality behavioral health services. Frey and Englehart said that, with the addition of Presence Health, they expect AMITA Health likely will be the state's largest provider of Medicaid care and of behavioral health care.

Post-merger plans call for Presence Life Connections, Presence's senior and long-term care ministries with 40 locations in Illinois and Indiana, to join Ascension Living, which is Ascension's senior care subsidiary.

It is likely that Presence Health's sponsorship would transition from Presence Health Ministries, to Ascension's public juridic person sponsor, Ascension Sponsor, the executives said.

Sr. Mary Elizabeth Imler, OSF, chair of Presence Health Ministries, said the health care systems coming together will improve health care in Illinois, with enhanced services and a stronger voice for advocacy. She said Ascension's commitment to formation is impressive and important for Catholic health care leadership moving forward.

She said she has seen a shift in health care over the years from competition, to cooperation, to collaboration, to co-responsibility, the latter a concept Pope Francis has advanced. She said co-responsibility involves a "shared sense that we're all brothers and sisters in this, and that each person brings their gifts to the table" to support the healing ministry of Jesus.

Alexian Brothers Health System, a Catholic nonprofit originally sponsored by the Alexian Brothers, and Adventist Midwest Health, a faith-based nonprofit, formed AMITA Health on Feb. 1, 2015. Its joint operating company structure allows the organizations to integrate operations while maintaining separate ownership of assets, and preserving their respective religious identities and mission priorities, the systems have said. Five of AMITA Health's nine hospitals are part of Alexian Brothers Health System. Ascension acquired Alexian Brothers Health System in 2012.

Not all of Presence Health's facilities will join Ascension. Presence Health said earlier in August that it is in separate talks for two of its 12 hospitals — Presence Covenant Medical Center in Urbana and Presence United Samaritans Medical Center in Danville — to join Peoria, Ill.-based OSF HealthCare, also a Catholic nonprofit. That move would extend OSF HealthCare's footprint in central Illinois further east in the state.

Active turnaround effort
Presence Health formed in 2011, when Provena Health of Mokena, Ill., and Resurrection Health Care of Chicago merged into the new organization. Presence Health's founding congregations are the Franciscan Sisters of the Sacred Heart, the Servants of the Holy Heart of Mary and the Sisters of Mercy of the Americas (all formerly Provena's sponsors), and the Sisters of the Holy Family of Nazareth and the Sisters of the Resurrection (both formerly Resurrection's sponsors).

Presence Health has struggled financially, particularly in 2015. Its leadership cited the competitive health care market in the greater Chicagoland area and the challenging budgetary environment in Illinois as pressure points in recent years.

Last August, Presence Health refinanced its debt with a $1 billion bond sale. Englehart and Jim Kelley, Presence Health's chief financial officer, told investors earlier this year that the system's turnaround plan was yielding results, with an net operating income of $12.3 million in the first quarter ended March 31 compared to a loss of $25.7 million in net operating income in the first quarter of 2016. That's according to financial statements summarizing their talk to bond investors.

Presence Health has shown other signs of financial improvement. On July 12, Fitch Ratings affirmed Presence Health at a BBB bond rating, revising the bond outlook from negative to stable. Presence Health had operating revenue of about $2.7 billion for the year ended Dec. 31, 2016. AMITA Health had operating revenue slightly over $1.8 billion for the fiscal year ended June 30, 2017.

Ascension operates 2,500 care sites, including 141 hospitals and more than 30 senior living facilities in 22 states and in Washington, D.C. Its operating revenue for the fiscal year ended June 30, 2016 — was $21.9 billion.

 

 

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