With little margin to cushion the impact of the Affordable Care Act (ACA) and changing reimbursement models, hospitals must ask themselves how they can best position their organizations – either as an independent entity or a collaboration with others – to be the sustainable healthcare providers of choice for the communities they serve.
The answer to this question does not arrive from a single discussion. Leaders of independent hospitals and health systems must take a careful look into the current state of their organizations to determine what is needed for future, long-term success.
To start, hospitals must have a precise understanding of how the organization is performing – on a number of fronts – and identify both opportunities for growth and barriers to success. This requires hospitals to conduct a data-driven gap analysis of the following areas:
• Demand for healthcare services
• Outmigration patterns
• Service line performance
• Core service strengths
• Physician alignment initiatives
• Medical staff supply and demand
• Financial strengths and weaknesses
• Debt capacity and liquidity analysis
• Competitor and payer assessment/threats
Once these components are analyzed, leaders must explore the findings with key stakeholders to determine how the organization can thrive in the long-term. These conversations will help uncover opportunities to grow core services, vehicles needed to enhance provider relationships, leadership and infrastructure shortcomings, and so on. Most importantly, however, discussions with stakeholders will reveal the level of operational autonomy they wish to uphold – as well as the amount of financial independence they can tolerate.
While some will decide that remaining independent is the right choice for their hospital and community, others will agree that collaborating with another provider is necessary to advance their core clinical priorities, financial viability and market competitiveness to achieve sustainability. Collaborations may include clinical affiliation, regional collaborative, accountable care organization (ACO), clinically integrated network or merger or acquisition.
Clinical Affiliation
A clinical affiliation is generally an agreement for organizations to collaborate on a particular initiative or service line.
Last year, CVS Health entered into clinical affiliations with several health care organizations, including Sutter Health in California, Millennium Physician Group in Florida, Bryan Health Connect in Nebraska and Mount Kisco Medical Group, PC in New York, in which the retail health care company delivers prescription and visit information to the partnering organizations by facilitating communication between electronic health record (EHR) systems.
This affiliation model is becoming more popular with the growth of retail health clinics, which have increased in number from 200 in 2006 to 1,800 in 2014.
In another example, community hospitals can partner with a larger academic medical center or tertiary hospital to secure physician coverage in specialty areas, such as orthopedics. This allows hospitals to provide continuum-centered care without the strain of recruiting orthopedic surgeons for their smaller organizations.
Regional Collaborative
A regional collaborative offers a flexible umbrella structure for partnering on specific initiatives and building the foundation for potential future integration. These often encompass many independent organizations in a common geographic area.
For example, Quorum Health Resources (QHR) client hospital Northwestern Medical Center (NMC) in St. Albans, Vermont, launched several collaborations to improve the health of its community, including:
• A clinical collaboration with the University of Vermont Medical Center;
• Two ACOs, including OneCare Vermont and Community Health Accountable Care (CHAC);
• Regional Clinical Performance Council (RCPC), which recommends methods for clinical integration and care management across the continuum for patients;
• Unified Community Collaborative, a governance structure that sets priorities and resources for community care integration; and
• Additional collaborations with local and regional providers, including a Federally Qualified Health Center (FQHC), home health agency and mental health clinic.
Collaborative regional planning allows providers to unite to deliver continuum-centered care that can improve quality, increase efficiencies and lower costs.
ACO
Accountable Care Organizations (ACOs) are groups of physicians and health care providers voluntarily formed to deliver coordinated care. The independent entity is owned by constituent organizations and creates shared accountability among participating providers. This collaborative can be used in conjunction with other options, as well.
As of December 2015, there were 782 ACOs in the United States serving an estimated 23 million covered lives. These numbers are projected to rise to 105 million covered lives, or one-third of Americans, in 2020.
A number of community hospitals have entered into ACOs through the National Rural Accountable Care Organization (NRACO), a program that encourages the use of supplementary staff and automation to lessen the burden of quality reporting and positions hospitals for heightened performance and improved physician Medicare payments under Merit-Based Incentive Payment System (MIPS).
Clinically Integrated Network
This is a collaborative strategy among hospitals and other providers contracting jointly in order to support improved care coordination and clinical outcomes.
For example, a clinically integrated network may include a network of smaller systems, such as primary care and specialty physicians, which work together in a simplified delivery model. This combination of resources significantly increases efficiency and quality of care, while reducing operating costs and redundancy.
Merger or Acquisition
A merger is the combination of two organization’s assets into a single entity, while an acquisition is the formal purchase of one organization’s assets.
The number of hospital merger and acquisition transactions has more than doubled from 2009 to 2012. These increases validate the claim that organizations must achieve clinical and economic scale to ensure a sustainable future.
There is no one-size-fits-all answer to which affiliation model will work the best for long-term success. That determination is the responsibility of hospital leaders based on their organization’s circumstances and community needs.
But, with such high stakes, it is imperative for hospital administrators and governing boards to continuously evaluate their strategic positioning to make the best long-sighted decision for their hospitals and the communities they serve.
John Maher is Senior Vice President of Consulting at Quorum Health Resources, a hospital professional consulting services firm that works with more than 150 hospitals across the country.
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