Are Affiliations Sustainable, or Simply a Stepping Stone Toward Full Integration?

The clinical affiliation. A partnership that allows two (or more) organizations to share expertise and resources, while each maintaining their own governance, board and brand.
For hospital boards that aren’t willing to give up their independence, the clinical affiliation is an attractive relationship. A smaller, not quite struggling, but perhaps less prestigious facility in a market partners with a larger one with a bit more brand recognition. Recently, Silver Cross Hospital in New Lenox, Ill., announced a clinical affiliation agreement with Advocate Health Care. And, Princeton (W.Va.) Community Hospital approved a clinical affiliation agreement with Charleston (W.Va.) Area Medical Center.
While clinical affiliations certainly provide the opportunity for the two parties to work together to improve care and share resources, are they sustainable over the long term?
No, according to some healthcare leaders I spoke to informally about the subject. One remarked there was “no question” most weak affiliations would lead to deeper affiliations over the years ahead.
Why? Because the reimbursement models are industry is moving toward will force full integration. Bundled payments, for example, can be paid out to an organization that then divides payment among the hospital for its facility fee, an independent physician group, anesthesia group, etc. However, such an approach is rather inefficient, and difficult to set up in the first place as it requires all parties to agree on their share of the total payment.
As providers work to reduce costs and improve quality, what we already know will become even clearer: There are just too many cost structures to support in our industry (think: physicians, facilities, payers, etc.).
The bottom lineTrue integration works best if the bottom line is shared by all. Just imagine the efficiency. We see this, of course, already, in organizations like Kaiser Permanente, where physicians, facilities and insurance arms aren’t separate, but part of a single larger organization — and it’s performance.