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2 S. Side hospitals consider uniting. Provident, Reese eyeing partnership.

Tuesday, July 10, 2007
Chicago Tribune
by Bruce Japsen and Azam Ahmed


Tribune staff reporter Kathy Bergen contributed to this report

Cook County-owned Provident Hospital and Michael Reese Hospital and Medical Center are exploring a unique partnership aimed at shoring up both money-losing medical centers on Chicago's South Side, officials confirmed Monday.

The talks come at a time when Cook County is under intense budget pressure to cut costs. And Reese's 37-acre lakefront campus has been eyed as additional space for the nearby Olympic Village, part of Chicago's efforts to land the 2016 Olympic Games.

Officials stopped short of calling the partnership a merger, but said it could involve creating a new, non-profit corporation that would manage services of both the public and private hospital. Nor is it clear if either facility would close or trim jobs.

For Provident, a deal could bring in $100 million in annual revenue and help fill beds, officials said. It currently houses fewer than 70 patients a day, but it has space for 200.

Meanwhile, Reese's lease at 2929 S. Ellis Ave. is set to expire in 13 years. Increasingly, its landlord, Medline Industries of Mundelein, is looking to sell the hospital's valuable parcel to developers.

"We don't own the land where we sit, and we don't own the buildings where we operate," said Dr. Enrique Beckmann, Reese's chief executive. "There are two hospitals that are challenged. The focus has been: How do we make sure that Reese and Provident don't stop providing services that are very needed in the county."

Any deal would face myriad hurdles, including approval from the County Board and from state health officials. Beckmann also said the discussions are preliminary and have involved him "presenting ideas to the community," including Dr. Robert Simon, interim chief of the Cook County Bureau of Health Services.

Simon said one possibility would be for Reese to join Provident's facility at 500 E. 51st St. Following a high-profile bankruptcy, Provident reopened in 1993 after the county spent more than $50 million on repairs.

"If Michael Reese closes it would be a disaster for the South Side because it would lose a major provider of health care," Simon said. "We would have all those patients coming [to Provident] that we don't have the funding to treat."
Simon said officials have discussed a possible merger, which would benefit both Provident and Reese.

"It would expand service at Provident without much, if any, additional cost, and at Michael Reese they get to take care of their patients, population and their doctors," Simon said.

Simon said talks arose because of interest in developers building the Olympic Village.

A deal that would lead to Reese's exit before the end of its lease in 2020 would make the property more attractive to potential developers as well as to Chicago's 2016 Olympic bid team.

Within the last week, the property was put on the market formally, with marketing packets going out to residential and retail developers, sources said Monday.

At the moment, the Reese site is not part of the Olympic Village plan, which calls for a $1.1 billion complex to be built by a private developer atop the McCormick Place truck yard, just south of the convention hall. The ultimate host city selection will come in 2009.

But the Reese campus is due west of the Olympic Village site. And adding that 37-acre parcel to the footprint would give the village architects and developers more breathing room. Medline, which owns the Reese campus, said it has "no knowledge of any conversations between Michael Reese and Provident," spokeswoman Jennifer Freedman said.

Reese CEO Beckmann said the hospital's decision to talk to Provident had nothing to do with potential Olympic plans but said "the owners of the land could exercise their right to use their land for other purposes other than the hospital."

Reese's financial condition has been deteriorating for years and it is only using about seven of 22 buildings on its campus.
The hospital is running at about half capacity, or an average daily census of 160 patients, Beckmann said.
About half of those patients are insured by Medicaid, the state health insurance program for the poor, Beckmann said. The hospital loses money because reimbursement rates don't cover its costs, he added.

Furthermore, both Beckmann and Simon said that Provident would make more money off Medicaid patients than Reese because county-owned facilities receive a higher reimbursement rate from the state insurance program.

But even as a deal could offer a much needed boost to Provident and Reese, it also poses questions for the institutions.
For one, Reese is owned by a for-profit company, Envision Hospital Corp. of Scottsdale, Ariz., which would likely expect compensation for the patients it would send to Provident.

Envision could not be reached for comment Monday night.

Another obstacle would be management, Simon said.

"The big question is the governance, the question of how to merge the two hospitals and how much control each board would have," Simon said. "The second problem would be when you blend the employees, how do you decide who to keep? Ultimately there is going to be some staff you don't need."

But Beckmann said Reese has not ruled out working with its landlord and potential future developers on a smaller site on the Reese property for a new hospital. Financing for such a facility and an agreement with Medline or a new landlord would have to be ironed out.

One South Side community leader is taking a wait-and-see attitude toward a possible deal.

"I'd be happy to see an increase in the quality of health services at Provident," said Ald. Pat Dowell (3rd). "In concept it sounds like a good idea, but you've got to see the details and know what the bottom line is for patients."
Reese's closest neighboring hospital is Mercy Hospital and Medical Center at 2525 S. Michigan Ave.

"Their patient base is very similar to Provident, in the sense that they have a lot of self-pay patients and Medicaid patients," Simon said.

Provident serves more than 50,000 people a year.



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