Proposed Northwestern-Cadence merger would create Chicagoland mega health system

If combined, the two nonprofit health systems would create one of the largest academic healthcare delivery systems in Chicago.

Cadence Health operates Central DuPage Hospital, a 313-bed facility located in the Chicago suburb of Winfield, Ill.; Delnor Hospital, a 159-bed, acute care hospital in Geneva, Ill.; and numerous outpatient facilities.

For its part, Northwestern Memorial HealthCare operates Northwestern Memorial Hospital (one of the region’s leading academic hospitals), the 201-bed community hospital Northwestern Lake Forest Hospital, many outpatient medical offices and its own professional and general liability insurance company.

The two entities signed a letter of intent last week and agreed that if they merged, they will operate under the Northwestern Medicine brand name. Dean M. Harrison, president and CEO of Northwestern Memorial HealthCare, would continue to lead the combined health system. Mike Vivoda, president and CEO of Cadence Health would become the Regional President for Northwestern Memorial HealthCare.

“A merger of our health systems would combine Cadence Health’s strong portfolio of primary and specialty care with our strength as one of the nation’s leading academic medical centers, to create a preeminent integrated academic health system that benefits all residents, regardless of their ability to pay, by giving them increased access to physicians, clinical trials and Northwestern University research programs as well as integrated primary, secondary and advanced tertiary services,” Harrison said in a statement.

For Cadence Health, the merger might also give it more leverage with payors as it would gain both size and a prestigious affiliation with Northwestern Memorial Hospital. As health plans seek to keep costs down with narrower networks, being part of a “must-have” system that plan members demand access to can be critical.

In return, Cadence would beef up Northwestern’s outpatient presence. Inpatient volumes have shrunk steadily over the years and healthcare reform may accelerate this trend. A recent report by the Skokie, Ill.-based consulting firm KaufmanHall showed that the greater Chicago hospital market could experience as much as a 24 percent loss of inpatient discharges and a 15 percent reduction of average daily census for its 71 hospitals if current trends in reducing preventable hospitalizations take hold.

The fact that two hospital systems with relatively health financials were seeking to merge “really speaks strongly to the direction healthcare is going,” noted Jordan Shields, a vice president at Juniper Advisory, a privately held Chicago-based investment bank that provides merger and acquisition services to hospital systems in an interview with the Chicago Tribune.

The merger will still need the approval of state and federal regulators to proceed, as well as boards of both Northwestern and Cadence.