Illinois hospitals are exploring a merger

An Illinois health system is exploring the possibility of merging with an independent hospital that has been serving its community since the late 1800s.

OSF Healthcare, based in Peoria, Illinois, is exploring a merger with Katherine Shaw Bethea Hospital, shown above.

OSF Healthcare, based in Peoria, Illinois, is exploring a merger with Katherine Shaw Bethea Hospital. The two organizations said May 10 that they have signed a term sheet to enter exclusive negotiations for a potential merger. KSB Hospital, as it is known, is based in Dixon, Illinois, a community of about 15,000 in the northern part of the state.

The organizations said they will spend the next several months working on a final agreement, and they noted that the deal will still require the approval of regulators.

OSF Healthcare operates 16 hospitals and serves patients in Illinois and Michigan. OSF Healthcare said in a statement that it has pledged to invest $40 million into KSB Hospital to renovate the facility and to improve access to care. OSF said that it also wants to “create seamless referrals to subspecialties.”

The organizations said the merger will lead to improved technology and better digital care options.

David Schreiner, president and chief executive officer of KSB Hospital, acknowledged that the facility is facing financial headwinds, just like many other rural hospitals around the country.

“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. “OSF HealthCare shares our deep commitment to caring for the health of rural communities and has demonstrated innovative ways to transform health care for the benefit of all people they serve.”

Robert Sehring, chief executive officer of OSF HealthCare, noted that KSB Hospital has been looking for the right partner.

“We appreciate that the process of selecting a new partner has created some degree of uncertainty for the employees of KSB and hope that they now feel reassured that the hospital will continue to serve the patients of the Sauk Valley communities well into the future,” Sehring said in a statement.

He pledged to ensure “continued quality and compassionate” healthcare for the Dixon region, and he said the system is looking forward to welcoming KSB Hospital’s clinicians and workers.

The organizations said if the merger is finalized, a local community advisory council will be formed to offer advice to hospital management.

OSF Healthcare operates 10 acute care hospitals, five critical access hospitals, and one handling transitional care. OSF operates 150 healthcare locations and employs nearly 24,000 people. The health system was founded by the Sisters of the Third Order of St. Francis.

KSB Hospital has 900 employees and offers specialty care at six locations.

Half of the nation’s rural hospitals are losing money, according to an analysis released in February by the Chartis Center for Rural Health.

In Wisconsin, two hospitals owned by the Hospital Sisters Health System closed their doors in March. Sacred Heart Hospital in Eau Claire and St. Joseph’s Hospital in Chippewa Falls both officially closed after serving their communities since the late 19th century.

Hospital mergers have been rising in recent months, and many analysts say financial distress has been driving some of the uptick in deals.

Read more: Hospital merger activity is expected to increase in 2024