Aug. 7—DIXON — Nearly 125 years ago, Judge Solomon H. Bethea donated his property to the City of Dixon to establish a local hospital in honor of his late wife, Katherine Shaw Bethea.
That property has become KSB Hospital, which provides primary care and select specialty medical services to the residents of Dixon at its main campus and to the residents of Lee and Ogle counties at six additional locations.
Bethea, who was a federal judge and mayor of Dixon in the early 1880s, donated his property to the city in 1895. When the city of Dixon accepted the gift, city leaders passed an ordinance—in accordance with the terms of the deed set by Bethea—giving the city the power to select and appoint the hospital’s board of directors.
Because KSB is now partnering with OSF HealthCare and planning a full merger with the organization, the terms of the Bethea deed must be waived by the Lee County courts in order for the merger to occur, because the terms set by Bethea, which relate to the process of appointing members to the hospital’s board of directors, create a barrier to the hospital’s affiliation with another health system.
As a result, the Dixon City Council unanimously passed a resolution Monday night declaring its support for repealing the terms of the original deed.
Any company that buys this property and joins forces with KSB will want to have its own ownership and decision-making structure, otherwise it would not be willing to make such a significant investment, says Dixon City Attorney Robert LeSage.
Because there are no known heirs to the Bethea deed, the decision to revoke the deed rests with a Lee County judge. The order will be used during the court proceedings to show the judge deciding the case that the city is in favor of revoking the deed and supports the subsequent merger of KSB with OSF, LeSage told the council Monday.
In support of dissolving the deed, the resolution states that the property Bethea gifted to the city in 1895 now represents only a small portion, about 6%, of KSB’s 10-acre main campus in downtown Dixon. It also asserts that combining KSB with OSF does not run counter to the original intent of Bethea’s gift to the city. Instead, the merger would fulfill Bethea’s desire to provide quality, affordable healthcare to Dixon residents by allowing KSB to continue serving the community, the resolution states.
In February, KSB’s supervisory board announced that it was officially reviewing possible partnerships due to rising operating and personnel costs, as well as changes in healthcare financing and the way patients use healthcare.
According to the resolution presented to the city council on Monday, the KSB board of directors analyzed the possibility of continuing to operate the hospital on its own and concluded that this would likely lead to closure.
Following the COVID-19 pandemic, KSB experienced an increase in expenses, including for wages, pharmaceuticals, utilities, facility costs and medical supplies. These increased expenses were not covered by increased reimbursement rates because KSB, like other rural hospitals, serves a large portion of its patients on Medicare and Medicaid, which reimburse at a lower rate than private insurance, the resolution states.
As a result, KSB operated with negative margins in 2022 and 2023. These operating margin challenges led to balance sheet erosion, and in January 2024, the hospital’s cash balance dropped to five days, making it impossible to borrow funds and reinvest in the organization, the resolution said.
The agreement between KSB and OSF includes $40 million in funding to renovate facilities to improve access to local care and enable seamless referrals to specialty physicians, according to a joint May 10 press release from the organizations.
“The great thing is that improvements can actually be achieved with money. We have an incredible network of people here at KSB,” Danny Langloss, Dixon’s city manager, told the city council on Monday.
Through the merger, KSB expects to retain its employees, make significant investments in buildings and technology, and improve access to specialized resources in the local community. All of these aspects will be specified in the contract with OSF, Langloss said.
After the planned merger, KSB will be governed by the OSF board of directors but will continue to have local representation through a community advisory board and a board of trustees, Dave Schreiner, KSB president and CEO, told the council.
The task of the foundation board will be to regularly review the agreement between both organizations to ensure that all conditions are met, Schreiner said.
The Community Advisory Board will provide advice and guidance to hospital leadership and OSF. The board will focus on insights, guidance and local strategy development, as well as providing feedback on local facility management, according to the May 10 press release.
“We have asked our current board to consider continuing (the Community Advisory Board) at least for a period of time,” Schreiner said Monday.
All members of the Community Advisory Board and the Board of Trustees must be approved by the OSF Board of Directors, Schreiner said.
In an interview with Shaw Local, LeSage said a hearing on the Bethea deed is scheduled in Lee County District Court in the coming weeks.
Over the years, the terms of the deed have been changed. For example, at one time only women were allowed to sit on the hospital’s board of directors, but that was later expanded to include men, LeSage said. The last change to the Bethea deed was in 1978, according to Lee County court records.
