After initial hesitation, state board approves Advocate Aurora deal to combine with Southern hospital system

A state board approved a plan Monday by Advocate Aurora Health to combine with Southern system Atrium Health, after initially withholding support for the deal.

The state Health Facilities and Services Review Board voted 6-0 Monday afternoon to allow the combination to move forward. The union would create one of the largest health systems in the country, with 67 hospitals and more than 1,000 sites of care across Illinois, Wisconsin, North Carolina, South Carolina, Georgia and Alabama.

The vote Monday followed months of uncertainty over the combination. When the issue first came before the board in September, board members said they didn’t understand key terms of the transaction. To the surprise of many, the board voted in September not to approve the applications and to reconsider the issue at a future meeting.

Since that September meeting, Advocate Aurora answered many of the board’s questions in letters sent to the board, such as the reasons for the combination and the proposed governance structure. Several board members, however, expressed frustration Monday, even as they voted yes, with the rules and limitations surrounding their positions. The board is required to approve any application, like Advocate Aurora’s, that is complete.

Under the proposed deal, Advocate Aurora and Atrium would form a joint operating company to be called Advocate Health, though Atrium’s hospitals would keep the Atrium name, Advocate’s Wisconsin hospitals would keep the Aurora name, and its Illinois hospitals would still be called Advocate. No money would change hands, and existing assets would remain in the states where they are now.

Advocate Aurora President and CEO Jim Skogsbergh previously told the Tribune the new Advocate would have headquarters in Charlotte, North Carolina, though workers at the current headquarters in Downers Grove and Milwaukee would not be expected to move. Many of those workers are already remote, and it’s not expected that anyone will be laid off because of the deal, Skogsbergh said. Systems leaders have said the combination would lead to 20,000 additional jobs.

For the first 18 months after the combination, Skogsbergh and Atrium Health CEO Eugene Woods will co-lead, and then Skogsbergh will retire, leaving Woods as the sole CEO.

Representatives for Advocate Aurora did not immediately answer questions Monday about whether the deal is still expected to close this year, and what remains to be done before that can happen.

The board wasn’t the first group to express concern about the combination. The Service Employees International Union Healthcare Illinois wrote a letter in August opposing it, saying it could reduce the quality of health care in the Chicago area while increasing costs, and possibly lead to a reduction in services offered. Also, after the deal was announced, a lawsuit was filed in May accusing Advocate Aurora of anti-competitive conduct, including suppressing competition. The lawsuit also alleges the system charges high prices in Wisconsin and raised prices in Illinois, following the merger of Advocate and Aurora Health Care.

Advocate Aurora has said in materials submitted to the state board that it has controlled annual cost increases, in many cases, since that merger.

Hospital systems in Illinois and across the country have been merging and acquiring one another for years, to gain economies of scale, reach more patients and adapt to changing technologies.

Hospitals often say they hope to improve care and affordability by merging, though researchers have found that hospital consolidation results in higher prices for insurance companies, and those costs can be passed along to consumers through higher premiums and other payments, in many cases.

Advocate has been working to grow through mergers for years.

In early 2017, Advocate walked away from a 2 ½-year bid to merge with NorthShore University HealthSystem after a federal judge ruled in favor of the Federal Trade Commission, which had challenged the deal. Later that year, Advocate announced that it would merge with Wisconsin’s Aurora Health Care, creating Advocate Aurora Health.

In June 2020, Advocate Aurora said it was in discussions with Michigan health system Beaumont Health over a possible combination. Later that year, the systems ended those talks with the leader of Beaumont saying the system wanted “to focus on our local market priorities and the physicians, nurses and staff who provide compassionate, extraordinary care every day.”