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The Rise of Regional Nonprofit

Health Systems: Challenges,

Opportunities, Future
A Health Salon Sponsored by Edelman and Juniper Advisory


Executive Summary
Edelman and Juniper Advisory welcomed an audience from all corners
of the health industry to Chicago for a discussion on the rise of regional
nonprofit health systems and the challenges they face in todays everchanging provider climate. While the panel took place in Chicago and
had a Midwest focus, participants acknowledged that these emerging
provider-side trends are gaining steam in other parts of the country
as well. Panelists included Stephen Morrissette, Board Chair of Silver
Cross Hospital in New Lenox, Illinois, and Adjunct Professor of Strategic
Management at the University of Chicago Booth School of Management;
Rachelle Hart, Senior Vice President and General Counsel at Aurora
Health Care, a regional nonprofit health system headquartered in
Milwaukee, Wisconsin; Pamela Davis, System President and CEO of the
recently created Edward-Elmhurst Healthcare and President and CEO
of Edward Hospital; and Lynn Hanessian, Chief Science Strategist at
Edelman. Jordan Shields, Vice President at Juniper Advisory, served
as moderator and guided a wide-ranging discussion that reflected the
diversity of perspectives represented on the panel.
M&A Considerations for Independent Hospitals
Following introductions, the panelists offered an analysis of the national
playbook that is being put to use when it comes to partnerships among
hospitals, clinics and physician groups. Lynn Hanessian stressed the
importance of making sure that all of the different stakeholders are
vested in any decision and offered up a nurse strike as an example of
what can go wrong when interests arent aligned. Stephen Morrissette,
representing a single-hospital system, jokingly acknowledged his
prey status on the panel before outlining the host of considerations
that a hospital like his must consider to survive in such a competitive
provider environment. According to Morrissette, Silver Cross physicians

prefer its smaller environment. He also noted that, relative to investorowned businesses, there is less motivation for a non-profit hospital
to go through the pain of a merger or acquisition because there are
not owners to collect proceeds at the end to justify the disruption of
a merger. However, he recognized the need to do something and
provided an overview of Silver Crosss build vs. buy analyses looking
at both comprehensive and service line relationships that led to Silver
Cross deciding to clinically integrate with Advocate Health Care and
establishing relationships with other institutions around specific services,
such as oncology with the University of Chicago Medical Center and
rehabilitation care with the Rehabilitation Institute of Chicago.
M&A Considerations for Regional Systems
Rachelle Hart, speaking on behalf of Aurora Health Care, which covers 60
percent of Wisconsin, offered the perspective of a potential consolidator
in remarking on the inevitability of provider combinations. However,
she cautioned that M&A activity includes alternatives beyond straight
consolidation and the formation of ever-larger hospital companies. Hart
discussed an arrangement that Aurora has recently entered into, called
abouthealth, where Aurora has partnered with six other Wisconsin health
systems to become clinically integrated. The sharing of best practices,
data and protocols promises to improve the quality of patient care
while also covering 80 percent of the states population. This type of
arrangement is representative of the kind of creative ventures being
pursued by many large providers around the country one that leads to
quality and efficient business collaborations with health players, some of
whom are competitors.
To Bear Risk or Not to Bear Risk?
Pam Davis, having recently overseen the merger between Edward
Hospital and Health Services and Elmhurst Memorial Healthcare,
discussed the ongoing question of what is the right scale and scope for
a provider organization. Davis stressed the difficulty of getting cost
out of the system while keeping pace with new requirements and still
improving quality. Furthermore, Davis noted the many factors that
Edward-Elmhurst considered before deciding to take on risk, including
the importance of the law of large numbers and geographic spread
in determining profitability. She added that a providers ability to be
nimble is hugely important in risk-bearing arrangements. Morrissette
underscored the dangers of bearing risk for smaller hospitals and health
systems, especially for hospitals like his that have a patient mix that
features a large percentage of Medicare and Medicaid patients.

Enlisting Physicians
A topic that each of the provider-affiliated panelists touched on was
the importance of enlisting physicians in partnership discussions and
articulating how the potential arrangement will impact them. Physicians
continue to be the lifeblood of provider organizations and taking into
account how a potential move will affect clinicians is paramount. In the
case of Edward and Elmhurst, Davis discussed how they were able to
involve physicians by providing flexible and simple solutions that ultimately
made them more amenable to the new partnership. Speaking from
Auroras experience with abouthealth, Hart highlighted the benefits of
clinically integrating independent physicians before participating in a wider
affiliation partnership like abouthealth.
The Effect on Patients
As the other panelists provided the hospital perspective in adapting to
a post-Afordable Care Act (ACA) environment that compels provider
consolidation, Lynn Hanessian focused attention on the patient. She
warned against any partnership that does not also account for the
disruption that it might cause for current and future patients. The advent
of the ACA has expanded health insurance but has also resulted in patients
choosing high-deductible plans that channel them into narrower networks.
Morrissette suggested that smaller hospitals like Silver Cross are especially
at risk of losing patients when employers and payers opt for these narrow
networks as a way to lower costs. With this point in mind, Hanessian
emphasized the importance of creating informed consumers who are not
only able to understand the details of different health plans, but more
generally, are capable of comprehending the type of health system efforts
that will be needed to bend the cost curve. The implications of the ACA
for providers are still playing out Aurora Health Care stands to lose
some 50,000 insured patients if the Supreme Court rules to end federal
subsidies as part of the pending King vs. Burwell case.
Confirmed for the Future: Change
The salon wrapped up with a discussion of alternative ways to organize
and finance healthcare. Options offered included Oregons system, where
the state works backwards from how much money is available to determine
what will and will not be covered. While there seemed to be a consensus
that the current healthcare system is by no means perfect, there was also
general agreement that there is no reason to believe that the provider-side
consolidation that has played out will end any time soon.

The topics addressed by the panelists are by no means unique to the
Midwest. They also are not topics that can be fully considered in the course
of one conversation. However, the hope is that the discussion will inspire
others to start new conversations that explore innovative solutions to
the complex challenges of todays healthcare landscape. It is uncharted
territory in which long-time competitors are becoming partners in outsidethe-box ventures, all with the underlying goal of preserving and enhancing
efficient, high quality care for patients. Open, honest dialogue, which
engages the multitude of key stakeholders, is vital for health systems,
regardless of their size or geography.


Pamela is President and Chief Executive Officer of the new
healthcare system formed by the merger of Edward Hospital
& Health Services and Elmhurst Memorial Healthcare in 2013.
The three-hospital system, one of the larger integrated health
systems and one of the larger employers in Illinois, includes
Edward, Elmhurst Memorial and Linden Oaks at Edward. The
system has combined revenues of more than $1 billion, more
than 50 locations across a service area of 1.7 million residents,
nearly 7,700 employees and nearly 1,700 physicians on its
medical staff. Pamela is also President and CEO of Edward
Hospital, a position she has held since 1988.
Previously, she served for 11 years in senior administrative
positions with Christ Hospital and Medical Center in Oak Lawn,
Illinois, including Chief Operating Officer. Prior to that time,
Pamela served for two years as Assistant Administrator of
Lutheran General Hospital in Park Ridge, Illinois.

Lynn is the Chief Science Strategist for Edelman. In her
position, she brings together industry, content and
media expertise to craft science and health-based value
narratives and coordinates communication and engagement
initiatives around scientific developments across a range
of industries, disciplines and publics. She is leading efforts
addressing market access challenges facing clients in the
US, ensuring integration and coordination across marketing,
communications and policy initiatives. Payer communication
strategies, thought leader engagement and advocacy counsel
are core components of these efforts.
Lynn has a deep background in health, medical and science
strategic positioning and communication. Lynn has been actively
involved in marketing, communications, advocacy relations,
professional society engagement and corporate positioning
programs, including health, science and consumer engagement
programs. Lynn has worked on a wide range of therapeutic
areas including orthopaedics, infectious diseases, CNS, allergic
diseases, and metabolic diseases.

Stephen is Board Chair at Silver Cross Hospital in New Lenox,
Illinois. He also is the Managing Director of Providence
Advisors, Inc., a provider of comprehensive strategic
advisory services to Boards of Directors as well as CEOs and
controlling owners/investors. Stephen has extensive expertise
in banking as a director, CEO and CFO, and healthcare
industry experience including roles as trustee, board chair,
hospital treasurer and advisor on medical practice mergers,
acquisitions and sales. Stephen has published several articles
on banking and healthcare M&A. He is an Associate Professor
at the University of St. Francis where his teaching includes
healthcare finance and he is an adjunct associate professor at
the University of Chicago Booth School of Business where he
teaches the M&A Strategy course in the MBA program. He holds
an MBA from the University of Chicago and a PhD.

Shelly is Senior Vice President and General Counsel at Aurora
Health Care, Inc., a $4.5 billion integrated health care system,
serving more than 90 communities throughout southeastern
Wisconsin and northern Illinois. Aurora, the largest integrated
health system in Wisconsin, has 15 hospitals, more than 150
clinics, 1,600 employed physicians, 70 pharmacies, the states
largest home care organization and, with more than 30,000
caregivers, is Wisconsins largest private employer. Shelly
joined Aurora in 2010 as Deputy General Counsel and became
Auroras General Counsel in 2013.
As General Counsel, Shelly is responsible for all legal matters
including litigation, contracts, governance, intellectual
property, financing, real estate and commercial transactions.
Prior to joining Aurora, Shelly was a partner in the Milwaukee
office of Foley & Lardner, LLP where her practice involved the
representation of health systems, hospitals, medical clinics,
physicians, nursing homes, and other health care providers for
more than 20 years.
Shelly serves on the Board of Directors of the Jewish Home
and Care Center, Jewish Home and Care Center Foundation,
and Aurora Health Care Foundation. Shelly has received
numerous professional and civic awards and recognitions.

Jordan is Vice President at Juniper Advisory and has more
than 15 years of experience advising hospitals on strategic and
financial issues. He works closely with CEOs and trustees on
a variety of transaction structures, partnerships and strategic
engagements. Prior to joining Juniper, Jordan was a member
of the health system advisory groups at Navigant and Ernst
& Young. He started his career at William Blair. Jordan holds
an MBA from the Kellogg School of Management, where he
was named Top Student in Health Industry Management by
the faculty. He earned his BA with Honors in Economics from
Bowdoin College.