The Iowa Health System, a seven-hospital system based in Des Moines, has entered into a non-binding letter of intent to explore a strategic partnership with Methodist Health Services of Peoria, Ill.
According to Bill Leaver, president and CEO of the Iowa Health System, if both parties are in agreement after the due diligence and subsequent processes are completed, Methodist would become the eighth senior affiliate hospital of IHS, which is currently the sixth largest nondenominational health system in the United States with annual revenues of $2.3 billion.
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As a result of healthcare reform, health systems are under pressure to coordinate care for patient populations while operating with greater efficiency.
“IHS and Methodist are a good fit together,” Leaver said. “Both are quality institutions, both are financially strong, and both are integrated with their physicians. We were searching for a hospital that would add value to our system through quality patient care and excellent patient experience.”
Methodist president and CEO Michael Bryant said the IHS culture and operating systems are in line with those of Methodist. Because IHS offers a decentralized model of local control, he said, Methodist will maintain its autonomy, including its local board of directors.
“The assets of the hospital and health system were created in Peoria and will stay in Peoria,” Bryant said. “We will remain a nonprofit organization where money is reinvested in the hospital, health system and community.”
IHS has relationships with 25 hospitals in Illinois and Iowa, while Methodist is a single-hospital integrated healthcare delivery system, with 37 sites serving 19 counties in central Illinois and annual revenues of $400 million.
David Gordon of Juniper Advisory, LLC, which is acting as financial advisor to Methodist in the transaction, said the IHS affiliation model is particularly well-suited to the needs of many hospital systems. “It provides for a partnership in which local involvement in management and governance is retained and access to capital and business scale is achieved,” he said.
Because the letter of intent is non-binding, either party can walk away at any time. The next step in the process is due diligence, the development of definitive agreements and preparing necessary filings with the appropriate regulatory agencies, including the Illinois Health Facilities and Services Review Board. An official closing of the transaction will occur upon receipt of the necessary approvals.