Alexian, Adventist to Create 'JOC' in Chicago

John Commins, June 23, 2014

Described as "neither a merger nor an acquisition," the deal between Alexian Brothers Health System and Adventist Health to form a "joint operating company" is intended to reduce overhead and improve economies of scale as they move toward population health models.

 

Mark A. Frey

Mark A. Frey
President and CEO of Alexian Brothers Health System

Alexian Brothers Health System and Adventist Health System are moving toward a "joint operating company" that that will create an integrated health system in Chicago's northwestern suburbs.

The deal, announced with a letter of intent agreement last week, is expected to be completed by the end of the year. It allows both health systems to keep their religious identities and missions, while integrating operations, reducing overhead, and improving economies of scale as they move toward population health models.

The two health systems say they have signed a letter of intent to move toward the JOC. David L. Crane, president and CEO of Adventist Midwest Health, and Mark A. Frey, president and CEO of Alexian Brothers Health System, were in agreement as they explained the reasons why in a telephone interview with HealthLeaders.

"It is neither a merger nor an acquisition," Frey clarified. "Both of our respective companies will retain our assets and our balance sheets remain intact. Alexian Brothers Health System continues to own and operate its assets and Adventist does the same thing. Our parent corporations will be able to consolidate the earnings. We will share a profit-and-loss statement with our respective organizations. So it is a shared P&L. None the less, both companies will continue to own their assets."

ABHS, part of St. Louis- based Ascension Health, operates five hospitals in the northwestern suburbs. AMH, part of Adventist Health System, operates four hospitals in the area. A definitive agreement between the two systems would have to be cleared by the state of Illinois. Frey and Crane say they anticipate those hurdles to be cleared in the coming months and the deal finalized by the end of the year.

Crane says the JOC came about in response to Chicago's changing healthcare market.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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