To double revenue, Advocate Aurora looks to add health systems

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The last time Advocate Aurora Health doubled its revenue was when it formed through a 2018 merger. Now, it may look to absorb more health systems as the $12 billion system strives to double its revenue yet again.

“We do see that there may be other health systems that will be interested in joining Advocate Aurora Health,” said Dominic Nakis, chief financial officer of the not-for-profit health system.

The system, based in Downers Grove, Ill., and Milwaukee, used its stage time at this week’s J.P. Morgan Healthcare Conference in San Francisco to unveil its ambitious 2025 goals, which include more than doubling annual revenue from about $12 billion to $27 billion and increasing patients served from 2.8 million to 10 million.

CEO Jim Skogsbergh acknowledged it will require a “herculean effort.”

Health system targets don’t necessarily need to be in a neighboring state like Minnesota or Indiana, Nakis said. It’s more about finding systems with similar worldviews and interests in population health.

“It has to be, ‘Is there is a value proposition for both of us? What good could come from us coming together? How does a merger in essence bring additional value for the communities we operate in?'” he said.

Advocate Aurora’s other 2025 goals include bringing its operating margin to 4.7%—it was 4.6% in the third quarter of fiscal 2019—and deriving 10% of revenue from new businesses that have a consumer focus.

Other strategies for reaching its revenue goals include getting into sports performance, mental health, sleep, nutrition and a number of other businesses, Nakis said. Expanding its Medicare Advantage and Medicaid managed care offerings will also play a role, as will expanding its consumer-focused digital health offerings.

Ascension is an example of a health system that has found success in monetizing every element of the patient interaction through its joint ventures, and Bon Secours Mercy Health made a big profit off of the sale of its revenue-cycle management provider, said Eric Klein, the head of Sheppard Mullin’s national healthcare team.

“Advocate Aurora hasn’t done that level of outside ventures,” he said. “If you put a few of those in, you could do it.”

Klein added that acquisitions alone would get them a lot of the way there.

“The natural next step, if Aurora is doing well for them, is to go find another Aurora,” he said.

While some research has found mergers raise prices and don’t improve quality, Skogsbergh said that hasn’t been the case for Advocate Aurora. He didn’t share details, but said the system has seen better outcomes.

Nakis elaborated that the merger heightened the system’s capability and experience to improve areas like sepsis, mortality and compliance with bundled payment programs.

Despite consolidating its CEO office from two to one, Advocate Aurora still maintains two headquarters, with no plans to consolidate them. Nakis said the system has not studied whether having a single headquarters office would improve efficiency, but said there is no unused space in either building.

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