Illinois hospital merger secures final approval

After months of work and anticipation, Illinois state regulators have signed off on the sale of KSB Hospital.

OSF Healthcare has acquired KSB Hospital in Dixon, Illinois. State officials have signed off on the transaction.

The Illinois Health Facilities and Services Review Board has approved OSF Healthcare’s acquisition of KSB Hospital. OSF Healthcare and KSB announced this week that they had secured the approval of the state board. The organizations first disclosed that they were exploring a merger in May.

A rural facility in northern Illinois, the Katherine Shaw Bethea Hospital first opened its doors in 1897. With state officials signing off on the deal, KSB officials say they see a promising future for the 80-bed hospital. KSB also operates a number of clinics serving Dixon and Lee County.

David Schreiner, president and CEO of KSB Hospital, had noted that it was increasingly challenging for an independent rural provider.

“We are thrilled to receive the state’s approval, solidifying our partnership with OSF HealthCare,” Schreiner said in a statement. “This marks a significant milestone in our journey to enhance the quality of care that our community has come to expect. OSF’s commitment to our mission and values makes them the perfect partner to help us build on our legacy of excellence.”

With the addition of KSB, OSF Healthcare now operates 17 hospitals serving patients in Illinois and Michigan. The system is based in Peoria, Illinois.

August Querciagrossa, regional CEO of OSF HealthCare, touted the benefits of the acquisition of KSB.

“We are honored to welcome KSB Hospital into the OSF HealthCare family,” Querciagrossa said in a statement. “Our shared commitment to providing compassionate, high-quality care will guide us as we work together to serve the Sauk Valley community. We look forward to building on the strong foundation established by KSB and achieving new milestones in patient care.”

When the organizations first disclosed they were exploring a deal, Schreiner cited the financial headwinds for the rural hospital, which reflects the difficulties facing other rural providers.

About half of America’s rural hospitals are operating in the red, and some facilities have had to curtail services. More than 700 rural hospitals, or nearly a third of America’s rural hospitals, are facing the risk of closure, according to a recent report from the Center for Healthcare Quality & Payment Reform.

“As health care continues to evolve, we are responsible for ensuring that we are planning for the future. The challenge of being a standalone, rural hospital in today’s financial environment, was an important element in our board’s consideration,” Schreiner said in a statement in May.

The two organizations said that they will work to ensure a smooth transition as they come together.

OSF is an integrated health system founded by The Sisters of the Third Order of St. Francis. The system now operates 11 acute care hospitals, five critical access hospitals, and one transitional care facility. The system now has more than 2,200 beds.

Fitch Ratings has a stable outlook for OSF Healthcare, citing its position as the market leader in the Peoria area. OSF also operates the only children’s hospital between Chicago and St. Louis, Fitch notes.

OSF Healthcare’s acquisition of KSB Health is one of a few transactions in Illinois over the past two years.

Prime Healthcare said in July that the system has reached a deal to buy Ascension Illinois, which operates nine hospitals in the state.

In 2023, Carle Health, based in Urbana, Illinois, completed the acquisition of three hospitals formerly associated with UnityPoint-Central Illinois: Methodist, Proctor and Pekin hospitals.