Evanston Northwestern, Rush North Shore finalize merger
North suburban hospital operator Evanston Northwestern Healthcare said it will acquire Rush North Shore Medical Center in Skokie, committing more than $160 million to the deal, according to a definitive agreement finalized today.
As part of the deal, which still needs approval of regulators including the Federal Trade Commission, Evanston Northwestern will retire Rush North Shore’s $54 million in debt and contribute $10 million to a community foundation. In addition, Evanston Northwestern will commit $100 million in capital over the next several years that includes establishing an electronic medical record system at the Skokie hospital.
“The merger will provide enormous benefits to the patients and families we serve for generations to come,” said James Frankenbach, president of Rush North Shore.
Evanston Northwestern operates hospitals in Evanston, Glenview and Highland Park. Rush North Shore is affiliated with Rush University Medical Center on the West Side and Rush-Copley Medical Center in Aurora through a so-called obligated group, which allows them to cooperate on financing needs. If Rush North Shore issues debt through the group, the other member hospitals would have to sign off on the spending plan.
But the obligated group these days is more focused on funding a huge renovation at Rush University Medical Center on Chicago’s West Side so Evanston Northwestern’s retirement of the Rush North Shore debt will help in the Rush University financing plan.
The Federal Trade Commission, which has taken issue with Evanston Northwestern’s acquisitions in the past, has not asked for additional information from the merging parties in this deal, Rush North Shore executives said.
Evanston Northwestern and Rush North Shore executives said they expect the deal to close by the end of the year.
Earlier this year, the FTC made official an earlier decision ordering Evanston Northwestern and Highland Park Hospital to contract separately with managed-care plans. Although Highland Park is owned by Evanston Northwestern, the FTC said that the two parties must allow health insurance companies to “negotiate separately again for those competing hospitals, thus reinjecting competition between them for the business of [managed-care organizations].”
Last year, the FTC affirmed a 2005 ruling by an administrative law judge that found Evanston Northwestern’s 2000 acquisition of Highland Park to be anti-competitive and in violation of federal law. The FTC did not order a divestiture of Highland Park but the agency and Evanston Northwestern came to an agreement .
The FTC alleged prices at Highland Park rose 50 percent or more in certain instances after the merger, compared with price increases of 4 percent to 6 percent in the several years preceding the combination.
Evanston Northwestern argued that its rate increases were catching up with poor managed-care contract negotiations in the past and that it invested more than $150 million in the facility.