KSB Hospital’s signage taken down in Dixon in anticipation of merger with OSF Healthcare

DIXON – KSB Hospital‘s merger with OSF Healthcare moved another step forward Friday as CR Signs workers took down the south-facing sign atop the hospital in Dixon.

After OSF’s takeover Jan. 1, the hospital will be renamed OSF HealthCare Saint Katharine Medical Center, but Scott Coots of CR Signs said new signage will take a few months to complete. It will become the 17th hospital in the OSF ministry, and a blessing is planned for Jan. 7.

OSF Healthcare, headquartered in Peoria, is a Catholic health care organization that has 16 hospitals with 2,131 licensed beds throughout Illinois and Michigan. It has about 24,000 employees, known as “mission partners,” across more than 150 locations and operates an extensive network of home, digital and on-site services.

Longtime OSF employee Jackie Kernan was selected as president of the new OSF Saint Katharine, and longtime KSB Hospital employee Drew Fenner was selected as vice president, according to a Nov. 26 OSF news release.

It will be the third time that Kernan, who has been a part of OSF since 2009, has led a community hospital undergoing a merger with OSF.

Kernan currently serves as president of OSF Saint Luke Medical Center in Kewanee, formerly known as Kewanee Hospital, and of OSF HealthCare Saint Clare Medical Center in Princeton, formerly known as Perry Memorial Hospital.

KSB’s partnership with OSF was made official May 10, when the two organizations announced in a news release that they’d signed a term sheet and expected a full merger.

KSB Hospital is an independent, nonprofit organization, employing 920 people. The downtown Dixon location is an 80-bed facility that offers traditional inpatient and outpatient services. The organization also operates an integrated medical group, with 70 practitioners providing medical services in primary and select specialty areas at six locations in Lee and southern Ogle counties.

Its agreement with OSF includes $40 million in funding for facility renovations to improve access to care locally and to create seamless referrals to subspecialties. With the affiliation, KSB expects the continued employment of its staff, significant investments in building and technology, and enhanced access to specialty resources in the local community.

KSB began formally exploring potential partnerships back in February due to escalating operating and staffing costs, as well as changes to health care financing and how patients use health care.

According to a resolution presented to the Dixon City Council on Aug. 5, KSB’s board analyzed the feasibility of continuing to operate the hospital independently and found that it likely would lead to its closure.

After the COVID-19 pandemic, the hospital experienced an increase in expenses including wages, pharmaceuticals, utilities, facility costs and medical supplies. Those increased expenses were not covered by increased reimbursement rates because KSB, like other rural hospitals, serves a large portion of patients on Medicare and Medicaid, which reimburse at a lower rate than commercial insurance, according to the resolution.

As a result, KSB operated with negative margins in 2022 and 2023. Those operating margin challenges led to the erosion of the balance sheet and, in January 2024, the hospital’s cash on hand dropped to five days, which made it impossible to borrow funds and reinvest in the organization, according to the resolution.