Quorum-Deaconess hospital sale approved by Illinois board

The Illinois Health Facilities and Services Review Board approved Quorum Health’s sale of four southern Illinois hospitals to Deaconess Health System and its affiliate Deaconess Illinois.

Evansville, Indiana-based Deaconess Health System, a nonprofit 12-hospital system with facilities in Indiana, Illinois and Kentucky, plans to acquire Crossroads Community Hospital in Mt. Vernon and Heartland Regional Medical Center in Marion. Deaconess Illinois, an independent entity formed in 2016 to help manage and coordinate services for two critical-access hospitals in Illinois, would purchase Union County Hospital in Anna and Red Bud Regional Hospital. Deaconess Illinois would have its own independent board when the transaction is completed.

Deaconess Health System would pay $68 million and Deaconess Illinois would pay $78 million for the respective facilities. Deaconess Health System would lease its two acquired facilities to Deaconess Illinois, which would operate the four Illinois hospitals if the deal is completed by the end of the year, as expected.

Brentwood, Tennessee-based Quorum, a for-profit system with 21 hospitals across 13 states, has been selling hospitals to pay down its debt and creditors following its 2016 spinoff from Franklin, Tennessee-based Community Health Systems and Chapter 11 reorganization in 2020.

Quorum, which has sold more than a dozen hospitals in the past six years, plans to sell Gateway Regional Medical Center in Granite City, Illinois, to Los Angeles-based American Healthcare Systems, pending customary regulatory approvals. That transaction is slated to close in January, after which Vista Medical Center in Waukegan would be its last Illinois hospital.

Quorum does not have the capital after bankruptcy restructuring and the COVID-19 pandemic to invest in the four Illinois hospitals it plans to sell to Deaconess, Chris Harrison, chief financial officer of Quorum, said at Tuesday’s review board meeting.

“We still have two assets in Illinois and are taking the same approach as we continue assessing what is the right ownership structure and what is best for the community,” he said.

A Quorum spokesperson said in a statement the system is pleased with the board’s approval. “Deaconess will continue to strengthen the hospitals and support the communities by providing vital healthcare resources,” the spokesperson said.

Deaconess Health System did not respond to requests for comment.

This acquisition is expected to expand the reach of Deaconess Health System, add services in new markets and increase its revenues, the ratings agency S&P said in November, when it revised its outlook for Deaconess from positive to stable following its $175 million debt issuance. 

Deaconess Health System reported a $45.5 million operating income on operating revenue of $1.6 billion in 2022, down from a $135.2 million operating income on operating revenue of $1.57 billion in 2021, according to its unaudited annual financial statement.

Quorum has struggled since its 2016 spinoff from CHS, racking up more than $300 million in net losses in 2017 and 2018 combined. The health system said in July 2020 it had met a $500 million debt reduction target outlined in its restructuring agreement after filing for bankruptcy three months earlier.

Correction: An earlier version of this story incorrectly stated that Deaconess Health System was acquiring the four hospitals. Deaconess Illinois, an affiliate of Deaconess Health System, will purchase two hospitals.

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