Memorial Hospital and BJC HealthCare of Belleville form 'strategic alliance' expanding market presence

Thursday, April 30, 2015

BJC HealthCare and Memorial Hospital in Belleville have agreed to form a “strategic alliance,” although details of the agreement are sparse.
The agreement gives Memorial access to BJC resources while allowing BJC to widen its presence in the Metro East, top executives of the two health care organizations told the Post-Dispatch Wednesday.

The deal is not a merger or acquisition, Memorial CEO Mark Turner and BJC CEO Steve Lipstein said.

The move comes a week after Memorial’s chief competitor, St. Elizabeth’s Hospital, won approval from state health regulators to relocate its current 303-bed hospital from downtown Belleville to O’Fallon, Ill.

Memorial had strongly objected to St. Elizabeth’s relocation, saying it would put additional stress on Memorial’s existing facility in Belleville, but Turner said Wednesday the timing of the BJC announcement is just a “coincidence.” He said Memorial and BJC have been talking for months.

Under the alliance outlined by the two executives, Memorial Hospital’s 2,300 employees will continue to be employed by and receive a paycheck from Memorial, not BJC. Leadership at Memorial will stay the same along with the hospital’s name and branding, they said.

But the governing board of Memorial Hospital will have equal representation from BJC and Memorial. The total number of board seats has yet to be determined.

Both Lipstein and Turner declined to elaborate on financial terms of the deal.

When asked if the two would split the revenue generated at Memorial, Turner said, “What’s generated here, stays here.”

Turner said partnering with BJC allows the 316-bed hospital access to BJC’s resources and will allow Memorial to expand certain service lines, although he would not say which ones.

Asked how BJC would financially benefit from the deal, Lipstein said the two organizations share a “financial responsibility” to ensure the hospital generates enough revenue to cover its expenses.

Lipstein said Memorial is the “perfect fit” for BJC because it helps the system “fill out” its geography.

The only other hospital BJC operates in the Metro East is Alton Memorial, a 206-bed facility, which is 33 miles to the north of Memorial Hospital.

BJC does own a 111-acre tract of land in Shiloh between St. Elizabeth’s new location in O’Fallon and Memorial’s new 94-bed satellite hospital currently under construction in Shiloh. BJC bought the tract in 2008 for more than $21 million.

Earlier this year, BJC expanded its footprint farther south after its acquisition of Mineral Area Regional Medical Center in Farmington, Mo.

Including Mineral Area, BJC operates 14 hospitals throughout Missouri and Illinois. In 2013, BJC reported an operating income of $146 million on total revenue of $3.9 billion. BJC employs 26,583 people.

Memorial Group is the parent organization of Memorial Hospital, Memorial Hospital East, Memorial Foundation and Southwest Illinois Health Ventures.

For 2013, Memorial Group reported a loss of $29 million on total revenue of about $297.7 million. The loss was attributed to being out-of-network with UnitedHealthcare, one of the nation’s largest insurers, for a few months, Anne Thomure, Memorial spokeswoman, said.

St. Elizabeth’s, which is owned by Springfield, Ill.-based Hospital Sisters Health System, posted a $15 million loss in the year ended June 30, 2013, the most recent available.

With the announcement of the strategic alliance, BJC and Memorial will now take the next three to four months to analyze whether to finalize the partnerships, also known as a due diligence period.

Once the due diligence is complete, the two will enter into a definitive agreement and seek opinions on the relationship from the Federal Trade Commission and the Illinois Health Facilities and Services Review Board to see if any certificate of need permits are required. The deal will then be subject to any state or federal regulatory approval.