Prime Healthcare intends to close one of the nine hospitals it's planning to purchase from Ascension Illinois, according to applications filed with a state regulator made public last week.
The deal announced in late July is slated to close in the first quarter of 2025 and, per the filings, would see Prime paying over $370 million for the facilities. The parties negotiated a purchase price of $5 million for Ascension St. Elizabeth, the hospital Prime hopes to close down.
The parties' deal also includes two ambulatory surgical centers in which Ascension had a 51% interest, plus other programs and facilities that are "outside of the purview of the [state regulator], including four long-term care facilities, a home care program, a hospice and medical groups/practices affiliated with the hospitals to be acquired," according to the filings.
In a letter to the regulator, a consultant retained for the transaction wrote that Ascension St. Elizabeth's only offered inpatient service is acute mental illness, which had an average daily census of 16.96 patients during 2023. The facility is also about a block and a half away from another of the transacted hospitals, which also offers acute mental illness inpatient services and "all of the ancillary and support services," including 24/7 emergency care.
"As a result, it is not believed that the proposed discontinuation will hinder the ability of area residents to access hospital services in any appreciable manner," the consultant wrote.
The organizations plan to discontinue the hospital's services in about half a year, and will be filing the required Certificate of Need Application with the regulator in the next month, according to the letter.
In a joint statement given to press, the organizations said that the hospital's "standby" emergency department sees just two to three patients per week.
Prime Healthcare is among the country's largest for-profit health systems with 44 hospitals and about 300 outpatient centers. Its nonprofit subsidiary, the Prime Healthcare Foundation, runs 14 of those hospitals and would be taking control of one of the nine involved in the Ascension deal.
Prime said in the deal announcement that it plans to invest $250 million into the acquired facilities' systems and technology alongside other improvements. It also said it plans to keep on nearly all impacted employees.
July 25, 2024
Ascension selling 9 Illinois hospitals, several care sites to for-profit Prime Healthcare
Ascension Illinois is selling several hospitals and their associated physician practices, post-acute and senior living facilities to Prime Healthcare.
The agreement includes nine hospitals and four additional sites of care all throughout Illinois. Prime said it would invest $250 million to upgrade the facilities systems and technology, as well as other capital improvements, and that no debt will be put on the hospitals to complete the transaction.
The deal is expected to be completed in the first quarter of 2025.
Prime said it plans to hire nearly all associates, while continuing and expanding services based on community needs, including charity care and community benefit programs. The acquisition will be the largest in the history of Prime Healthcare and its 501(c)(3) charity, Prime Healthcare Foundation.
Ascension Illinois, a nonprofit Catholic health system, has a mission of serving all individuals and in particular those most vulnerable, the health system’s president and CEO, Polly Davenport, said in a statement. “Prime Healthcare’s Mission and commitment to clinical excellence and health equity will carry on this legacy, ensuring that the greater Chicago area has sustainable, quality healthcare access long into the future,” Davenport said.
Over the past few years, Ascension, the parent health system, has struggled to address high operating costs and revenue challenges, ending the 2023 fiscal year with a $2.66 billion net loss. Things improved in the first half of 2024, with the system reporting a significantly smaller operating loss at its fiscal nine-month cutoff compared to the same time in 2023. Similar to other systems, Ascension has seen substantial increases to its volumes and net patient service revenue that fueled total operating revenue growth of 6.2% for the quarter and 5.3% for the nine-month period.
Under the latest deal, eight of the hospitals would become for-profit, while St. Francis in Evanston would remain nonprofit as part of Prime’s charity, the Chicago Tribune reported. The hospitals would reportedly no longer be considered Catholic once acquired, and the organizations are working with the archdiocese to determine whether there are Catholic traditions the hospitals can carry on. The hospitals will keep their current names minus the Ascension branding, per the Tribune.
“Our agreement with Ascension reflects our decades-long mission of saving, improving and investing in community hospitals,” Prime President and Chief Medical Officer Sunny Bhatia, M.D., said in the announcement.
Prime is the country’s fifth-largest for-profit health system, with 44 hospitals in 14 states and more than 300 outpatient locations. Fourteen of its community hospitals are owned and run the Prime Healthcare Foundation.
Earlier this year, Prime Healthcare bought the real estate of five hospitals it runs from Medical Properties Trust. The deal was part of the company’s goal of strengthening its balance sheet, according to the REIT’s CEO Edward Aldag. Also this year, it announced it would transition two of its for-profit hospitals in Pennsylvania to nonprofit status.
In the latest announcement, Prime was billed as being known for its ability to turn around financially strained hospitals. As Fierce Healthcare reported in April 2024, Fitch Ratings wrote that its charity’s strategy had pivoted from a focus on acquiring distressed hospitals to “strengthening the system fundamentals through vertical integration of existing assets, supported by investment directed at ambulatory presence.”