Michigan's Trinity, Chicago's Mercy Sign Letter of Intent for Acquisition

CHICAGO — Novi, Mich.-based Trinity Health’s possible acquisition of the stand-alone, 159-year-old Mercy Health System, based in Chicago, last week advanced when the two Catholic health care providers announced they had signed a nonbinding letter of intent to negotiate a union.

“While we stand strong today, we realize that with the uncertainties of health care reform and the challenges facing stand-alone hospitals, we need to be responsible and consider an affiliation with a larger Catholic health system,” Mercy’s president, Sister Sheila Lyne, said in a statement.

When founded by the Sisters of Mercy, the hospital served as the first teaching facility in Chicago. The 479-bed hospital is located on the near south side of Chicago.

Mercy carries a below-investment grade rating due to its long struggles, though it has seen steady improvement in its operating performance in recent years. Its hospitals and clinics generated $248 million in revenue in fiscal 2010.

Trinity is one of the largest Catholic systems in the country, operating 47 acute-care hospitals, 401 outpatient facilities, and 31 long-term care facilities in 10 states that generate $9 billion in annual revenues. Trinity’s debt carries ratings in the mid-double-A category from all three agencies.

If the two decide to move forward as planned, the deal could be sealed by next spring. Trinity said it provided nearly $460 million in community benefits in fiscal 2010.

Hospitals that operate in Illinois have come under heightened scrutiny for their charity care levels and the state has revoked the property tax exemptions of four for failing to provide a sufficient amount.

“With this potential affiliation with Mercy Chicago, Trinity Health continues its commitment to strengthening Catholic health care in the Chicago area and across the nation,” said Trinity president Joseph R. Swedish.

The merger gives Trinity an added foothold in the Chicago-area market, while Mercy could benefit from an infusion of funding for needed capital projects. Trinity established a presence here when it acquired Loyola University Health System in suburban Chicago in June.

The proposed health care union is the latest in a series to sweep through the Chicago region.

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Healthcare industry Michigan Illinois
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