Executive roundtable: Community hospital affiliation strategies

As the healthcare industry changes, relationships between hospitals have also changed. Increasingly, smaller community hospitals and larger, tertiary hospitals in the same region are joining together to keep local healthcare strong.

Here, executives from community hospitals, larger tertiary facilities and Community Hospital Corp. discuss what regional strategies look like in their markets and how facilities of all sizes can benefit from working together in a strategic regional relationship.

Note: Responses have been edited for length and clarity.

Question: What constitutes a regional strategy — what could it look like? What constitutes best practices?

Charlotte Burns, vice president of network affiliates for TriStar Health (Brentwood, Tenn.): Prior to joining HCA TriStar, I was a rural hospital CEO for many years, so I've been on both sides of regional partnerships and understand the importance of them.  At TriStar, we are developing regional strategies that are based upon the individual needs of the rural hospitals in our market.  We realize that rural hospitals may have different needs at different times, so we do not have one set strategy for all hospitals.  We are primarily focused on offering nonexclusive affiliations with a menu of services. The rural hospitals can select which services they're interested in. We're providing a lot of telemedicine services, primarily emergent stroke and behavioral health consults, and looking to expand into other service lines.

Phyllis Cowling, president and CEO of United Regional Health Care System (Wichita Falls, Texas): Part of our strategic plan at United Regional was to look at how we could reverse or limit the outmigration of patients from both our primary and secondary service areas. We don't want patients exiting the region. An affiliation helps to prevent that.

We have a clinical affiliation agreement with Bowie Memorial Hospital [in Bowie, Texas], which has a management agreement with CHC. Bowie Memorial can now market itself as a clinical affiliate of United Regional. It's important they continue to utilize their name, but they can tag on our name as well. We provide assistance with physician recruitment, and we've facilitated some transition in ER coverage to help provide better care. We will also be extending a line of credit for strategic and capital improvement. One of the positives of the relationship in my perspective is the limited financial risk. It's defined risk relative to the line of credit, not associated with their bottom line performance.

Shane Kernell, CEO of St. Mark's Medical Center (La Grange, Texas): From a community hospital standpoint, for us partnering with a larger hospital in a larger city lends immediate credibility to the local center. We're a beautiful hospital with a great medical staff, but to have "St. David's" [as in St. David's HealthCare in Austin, Texas] in small print below our name is an immediate credibility factor for us. From a perception standpoint, that's number one. But we can also align ourselves from a business standpoint. They may have best practices we may not have, or policies and procedures, that we now have access to through afflation.

We also have another partner; our business affiliate is CHC. It's a great arrangement. CHC helped in researching who we could partner with clinically. They realized we needed a dance partner, that we couldn't be a stand-alone.

Cindy Matthews, executive vice president of Community Hospital Corp. (Plano, Texas): From a community hospital standpoint, finding a partner is really important. It helps with physician recruitment and provides other benefits. Larger hospitals want to ensure the hospitals within their region are successful, but may not be in a position to acquire a smaller hospital. The larger hospital’s regional strategy often includes what we call a clinical affiliation, where they affiliate with a community hospital but do not necessarily manage or own it.

With CHC, if we're working with a smaller community hospital, we look in the marketplace and see what tertiary hospital could benefit the rural hospital. There are a number of ways tertiary providers can assist the smaller hospital. Sometimes, the tertiary hospital has specialists who could rotate, like an orthopedic surgeon or cardiologist who could go to the smaller hospital once a week and do clinics there. Sometimes there can be assistance with ER coverage. Service line program development can be done from that standpoint, too. We also encourage someone from the tertiary hospital to sit on the rural hospital board to learn firsthand the needs of the community.

Q: Why would a larger hospital system or tertiary hospital be interested in a regional strategy? What value do they see?

Charlotte Burns: Value is an important word. We need to bring value to those outlying hospitals since a lot of our patients come from the areas they serve. Healthcare is local, and especially in Tennessee, many people live in rural communities. We want the rural hospitals to provide the best care they can, but when their patients require a higher level of care, we would like to provide that support for those patients.

Phyllis Cowling: For us, it's simply a part of who we are. Our passion is to provide excellence in healthcare for the communities we serve, where "communities" is purposely plural. As a regional referral center, we have a responsibility for multiple communities within our region. That's first and foremost why we do this.

Secondly, it's consistent with our strategic plan. It's an opportunity to align more significantly with our secondary service area hospitals and physicians. It's a way to hopefully see benefit for both the small community as well as our organization while taking limited financial risk in doing so.

Shane Kernell: I know a lot of larger hospitals are doing this across the board instead of buying community hospitals or trying to put them out of business. That's not practical from their standpoint. They need us [smaller hospitals]. Bed capacity becomes an issue. Why not, as a larger hospital, align yourself with good rural hospitals that are geographically essential in their area and have the patient stay there? For bed capacity issues alone, that makes perfect sense.

Cindy Matthews: The partners we have want the community hospital to survive. They know consumers would prefer to have their healthcare be local. The best tertiary partners want to keep the patients in the community and be served in the community by smaller hospitals. Then, for those patients that really do need a higher level of care, they can receive those services at the tertiary hospital. It's not feasible for all patients to go to the tertiary hospital if a smaller hospital closes. The best partner wants those rural hospitals to remain vital to their community and have the higher level of services come to them.

Q: What are the benefits to the community hospital or other players?

Charlotte Burns: We help elevate the care at community hospitals through education and training, the sharing of protocols, telemedicine services, physician recruitment, assistance in becoming primary stroke centers or accredited chest pain centers, or other similar types of services. Depending on the type of relationship established, an affiliation can also assist the community hospitals in operating more efficiently by providing access to a group purchasing organization to improve supply chain management or by offering assistance with other shared services.  

Phyllis Cowling: We're hopeful that it increases the likelihood of viable sustained healthcare services within that community. I think, as we all know, there are a lot of challenges in healthcare right now, and they can be amplified in small rural hospitals. Hopefully this is an avenue to ensure continued delivery of local healthcare services for those communities.

Specific positives about the relationship we've crafted: It allows the community hospital to strengthen its management team while maintaining independence and local board control and oversight.

Shane Kernell: Let me share one service line in particular: our OB service line. We deliver 275 to 300 babies a year. Our community has benefitted from our ability to maintain this service. St. David's has helped with best practices, policies and procedures. For example, if we have to transfer a baby or mother from St. Mark's to St. David's, our policies are so in line that when St. David's comes here to pick up, it is absolutely seamless for the patients. It works like clockwork being clinically affiliated.

Further, with teleneurology, our goal is to be a regional stroke center. If someone in our area is having health issues or potentially having a stroke, they can confidently come here and get immediate attention, the same care as what they would receive if they went to St. David's, stabilize and get them off to a higher level of care. It's a huge benefit to the community.

Cindy Matthews: Occasionally we will brand the community hospital with the larger hospital’s brand. This provides a little bit of a halo for consumers and is seen as a real benefit.

So many community hospitals want to stay independent these days. We think independence is great if they can do that. But independence doesn't mean isolation. Being a partner with something bigger, even just an affiliation, helps with the future sustainability of the hospital. What we advocate is that the independent hospitals can stay independent but need to be a part of the combined strength offered through health systems and organizations like CHC.

Q: How could a strategic regional relationship prepare parties for health reform?

Charlotte Burns: There are not a lot of independent community hospitals today, and it's getting harder and harder for them to survive. In Tennessee, three rural hospitals have closed in the past year and a half. In today’s healthcare environment, it is important for independent rural hospitals to have a tertiary partner. I believe one of the primary benefits of having a partner is to help them operate more efficiently which in turn helps them to remain independent and allows them to continue serving their communities.

For the tertiary side, healthcare is local, so we need to connect with those outlying hospitals and primary care physicians. As we hear more about bundled payments, population health management, accountable care organizations, clinically integrated networks, etc., we have to be coordinated in our efforts. We also need to make sure our IT systems “talk” to each other so that appropriate information can be shared. Strategic partnerships will allow for better coordination of healthcare as we move into the future.

Phyllis Cowling: Again, I think it accelerates or elevates relationships. We hear certain words when we talk about reform, like the need for strong alignment and economies of scale. The ability to increase efficiency and effectiveness are paramount for all of us. We have a better chance to do that together than separately. There's no guarantee for any of us right now, but a strategic regional relationship increases the likelihood for success.

Shane Kernell: We're looking at a lot of apples to oranges comparisons. The [Patient Protection and Affordable Care Act] affects us differently than in Austin; our payer mix dictates that. The payment for ACA to get everyone covered by insurance is going to be done by cutting our largest payer source. If we don't align ourselves with a larger dance partner and strategically build new businesses in alignment with a clinical affiliate, that's going to be a problem.

Cindy Matthews: We're seeing more and more that healthcare systems are joining up in one way or another. Rural hospitals don't want to be left out in the cold when hospital systems decide who to partner up with. They should be aware that creating an afflation is an appropriate option. And for larger systems, looking around geographically and making sure they have delivery points out there even in smaller communities is going to help prepare them for population health management and for future contracting purposes.


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