Vanguard inks deal to grow in Chicago

Charlie Martin-led company inks LOI with struggling local system

Email | Print By Geert De Lombaerde

Vanguard Health Systems has signed an agreement to buy two hospitals and an outpatient center in the Chicago suburbs, where it already runs two other facilities.

Nashville-based Vanguard and Resurrection Health have signed a non-binding letter of intent whose terms have not been disclosed. If completed as scheduled in the middle of next year, Vanguard's acquisition of Westlake Hospital, West Suburban Medical Center and the outpatient facility will add 330 beds and about 2,700 people to the company's Windy City network.

“Through MacNeal Hospital, we have become familiar with communities served by West Suburban and Westlake, and look forward to working with Resurrection to build upon their many years of commitment at West Suburban and Westlake,” said Vanguard Chairman and CEO Charlie Martin in a release.

Vanguard's two current Chicago-area hospitals, MacNeal Hospital and Weiss Hospital, have a combined 76 licensed beds and generated $467 million in revenue in the fiscal year that ended June 30. If Westlake and West Suburban generate the same revenue per bed, they'll contribute about $200 million annually to Vanguard's top line.

The proposed acquisition, which needs the approvals of several state officials, already has attracted concern from union and community representatives. A leader of the Oak Park-Austin Health Alliance, which has called for changes at West Suburban since the middle of this decade, said his group is “concerned that when a hospital converts to a for-profit business, the problems of access, transparency and accountability grow... The consequences of this sale should be considered very carefully.”

Resurrection, a nonprofit that runs eight hospitals in the Chicago market, has struggled financially for several years. It rang up fiscal 2009 revenues of $1.7 billion, but lost $69 million from operations.

In a recent report on a pending bond sale, Moody's analysts Beth Wexler and Lisa Goldstein said the organization is off to a better start in 2010, but noted that CEO Sandra Bruce and her team were "working to reposition the portfolio" in part because of "growing operating losses incurred by several facilities."