NorthShore Buys Chicago’s Swedish Covenant Health

NorthShore University HealthSystem, which has been in the market for opportunities to expand its hospital network, is set to acquire Swedish Covenant Health by the end of the year for an undisclosed amount.

NorthShore President and Chief Executive Officer J.P. Gallagher said that, with the partnership, they were creating a positive relationship and a local healthcare system that will be rooted in the community.

“In today’s environment, we have an opportunity to transform how we deliver care through creative partnerships that develop best care practices and support long-term growth. Partnering with Swedish Covenant will allow us to build on our respective exemplary physician networks and expand primary, immediate and specialty care access across our communities,” Gallagher said.

Brief terms of the deal

A statement said that under the proposed structure, Swedish Covenant will join the NorthShore health system and continue to operate its full-service, acute care community hospital. 

It was further explained that Swedish Covenant will continue to operate the 312-bed hospital in the Ravenswood neighborhood, while maintaining  its own physician network after the completion of the merger. NorthShore, which has four hospitals — Evanston, Glenbrook, Highland Park and Skokie — will make its research programs and specialty services available to Swedish Covenant patients.

The joint statement did not reveal the terms of the deal. Executives from the two companies only described  it as “a multi-million dollar deal, is a fair and conservative way to put it.”

NorthShore is expected to make a significant philanthropic contribution to Swedish Covenant’s foundation. It will also give money to the Evangelical Covenant Church, Swedish Covenant’s parent and assume Swedish’s pension responsibilities.

The Swedish Covenant Hospital Foundation is expected to continue to operate and fund health and wellness programs including violence prevention, housing the homeless and dental care.

Swedish Covenant President and CEO, Anthony Guaccio, said: “We have an incredible opportunity to build on the expertise of two experienced institutions with a shared vision and complementary services to create transformative healthcare for the next generation. Our partnership with NorthShore will support our ability to continue serving our patients by delivering comprehensive community-based healthcare while also benefiting from the resources and capabilities of a larger health system.”

NorthShore’s acquisition of Swedish Covenant is now awaiting regulatory approval, but both parties are confident it will go through by the end of the year.

Evangelical Covenant Church, Swedish Covenant’s parent, said it was “very optimistic about the ongoing future of the hospital as it partners with NorthShore.”

Swedish Covenant has been serving the North and Northwest Sides of Chicago for the past 133 years. Its original name was The Home of Mercy.

On the market for a deal

Swedish Covenant has been looking for a buyer for a while. Last year it met with at least six potential buyers. Just recently, there had been speculation that The Rush System for Health — an academic health system that includes Rush University Medical Center — and Swedish Covenant were on the cusp of signing a deal.

Guaccio said Swedish Covenant had been “very thorough when it was looking at NorthShore. Swedish approached NorthShore first. And when it came time, NorthShore graciously accepted.”

The Chicago Tribune reported that, in recent years, hospitals have faced pressures such as late Medicaid payments; reimbursements from state and federal health insurance programs that don’t fully cover the cost of care; and rising costs for technology and medications, among other factors. With that in mind, a number of independent hospitals have concluded that their future lies in joining larger health systems.

“Based on what’s happening at the state level and even the national level, it’s been really hard for us to continue to grow,” Guaccio said.

On the other hand, this is NorthShore’s first major acquisition since an attempt to merge with Advocate Health Care fell through following a federal judge’s ruling in favor of the Federal Trade Commission or FTC, which had challenged the deal. The FTC had argued that the proposed merger would be bad for consumers.

Crain’s Chicago Business reported that Swedish Covenant brought in $273.5 million in net patient revenue in 2018, while NorthShore had $2 billion. When combined, the two health networks will have more than 12,000 employees, including about 1,500 doctors.