Sherman Health Systems to join Advocate Health Care
Sherman Health Systems has signed a letter of intent to join Advocate Health Care, a move that will likely intensify competition for patients in the northwest suburbs.
Elgin-based Sherman’s board voted Monday to sign a letter of intent to pursue a deal with Advocate, Sherman and Advocate said in a joint statement this morning. If an agreement is reached, Oak Brook-based Advocate would become the parent company of Sherman.
Sherman, with net operating revenue of $308 million in fiscal 2012, has been looking for a partner for at least a year. In December 2009, Sherman opened its new 255-bed hospital, which attracted new patients but doubled the hospital’s debt to $300 million.
Sherman and Advocate have clinical integration programs that focus on improving patient outcomes to lower costs, such as helping patients better manage chronic conditions, said Dan Marino, CEO of Health Directions LLC, an Oakbrook Terrace-based consultancy. Advocate also brings capital resources to the table and pricing power to better negotiate contracts, Mr. Marino said.
“I think it’s a good move for Sherman,” he said. “From a cultural standpoint, it makes sense.”
For Advocate, with 2011 revenue of $4.4 billion, acquiring Sherman would extend its reach along the heavily populated Interstate Highway 90 corridor. Sherman Hospital is about 15 miles southwest of Advocate Good Shepherd Hospital in Barrington and 30 miles west of Advocate Lutheran General in Park Ridge.
“We’re pleased that we will offer our patients the expertise of one of the top 10 health systems in the country,” Sherman CEO Rick Floyd said in the statement. “Through this partnership, Sherman will be able to grow and expand our services at an accelerated pace to become a distinctive, regional destination for care.”
Advocate and Sherman expect to finalize a deal between May and July.
“We are thrilled about the potential opportunity to partner with an organization that is as strong as Sherman Health,” Advocate CEO Jim Skogsbergh said in the statement. “Advocate and Sherman share numerous core values, including a commitment to health outcomes and patient safety and a commitment to the communities we are privileged to serve.”
Sherman had narrowed its choices to Advocate and Winfield-based Cadence Health System, a two-hospital network.
A spokesman for Cadence said that while Sherman’s decision was “disappointing, this was only one of many growth opportunities we are currently exploring. We remain committed to our strategy of long-term growth for Cadence Health, and will continue to explore potential partners who share our vision of delivering seamless access to high-quality care through state-of-the-art technology and an unwavering patient focus.”