On March 28, 2011, Methodist Health Services Corporation (MHSC) and Iowa Health System (IHS) entered into a non-binding letter of intent to explore a strategic partnership between the two nationally recognized health systems. If both parties are in agreement after the due diligence and subsequent processes are completed, Methodist would become the eighth senior affiliate of IHS, the sixth largest nondenominational health system in the United States, with annual revenues of $2.3 billion.
Why is Methodist doing this? “First and foremost, because it is the right thing to do—for Methodist, our patients, our physicians and our community,” said Methodist President and CEO Michael Bryant. “Strategically, Methodist has been evaluating its role within the evolving healthcare landscape,” Bryant added. “The time to look for a strategic partner is when you are in a position of strength and can bring value to a new organization.” Methodist, whose A2 bond rating is the highest of any Peoria hospital, is strong financially, clinically and culturally. That strength has enabled Methodist to take its time to find the right strategic partner.
The process of looking for a strategic partner began in 2008, when healthcare reform came to the forefront in the presidential campaign. In 2009, the MHSC Board began a careful analysis of what a new healthcare landscape might look like and where Methodist would fit strategically. That led to discussion of the need for a strategic partner, or “big brother,” to help Methodist thrive in an increasingly challenging healthcare environment.
The MHSC Board began evaluating potential “big brothers” at the local, regional and national levels. The board also discussed what was important to Methodist in a potential relationship. Those discussions led to the development of seven key principles that eventually formed the framework for the letter of intent. Those core principles include:
- Sharing a strategic vision of a partnership between regional providers that recognizes the value and importance of meaningful local governance.
- Recognizing the importance Methodist places on its long-term commitment to the communities it serves.
- A commitment to support strategic initiatives that ensure Methodist will retain its nationally recognized position of leadership in quality and service.
After 27 months of research and analysis—including the evaluation of 25 organizations, from regional to national companies, and talking to hospitals about forming a central Illinois network—the MHSC Board voted unanimously to execute the letter of intent with IHS.
IHS has relationships with 25 hospitals in Illinois and Iowa, employs nearly 20,000 people and sees more than 2.5 million patient visits per year. Among IHS hospitals are Trinity Rock Island, Trinity Moline and Blank Children’s Hospital in Des Moines. IHS has more than 140 physician clinics serving 63 communities and includes three accredited colleges of nursing and/or allied health fields.
“Methodist and IHS are a good fit together,” said IHS President and CEO Bill Leaver. “Both are quality institutions, both are financially strong, and both are integrated with their physicians. We were searching for a health system that would add value to our system by delivering quality patient care and excellent patient experience.”
Because IHS offers a decentralized model of local control, Methodist will maintain its autonomy, including its local board of directors. “The assets of the hospital and health system were created in Peoria and will stay in Peoria. We will remain a not-for-profit organization where money is reinvested in the hospital, health system and community,” Bryant said. “IHS recognizes Methodist’s commitment to our community and the dedication of the people who have invested their livelihood in Methodist for 111 years.”
Bryant added that Methodist will keep its name. “This is not a buy-out; it is not a merger. Methodist will remain Methodist,” he said. As for what this will mean for Methodist’s patients, Bryant said, “You’ll have the same doctors you’ve always had, you’ll see the same nurses and other staff you’ve always known. You won’t have to go to Iowa for your care.”
The next step in the process is due diligence. Once completed, if both parties determine they want to move forward, Methodist and IHS will begin working on a definitive agreement and filing with the appropriate regulatory agencies. Closing of the transaction will occur upon receipt of the necessary approvals. iBi
