Sanford Health is a rural healthcare provider, but not in the traditional sense of the word. It’s a large integrated system spanning the Dakotas with 2.5 million lives, but much of its current growth has been driven by acquisitions of and affiliations with rural healthcare providers. Partnerships with these rural providers allow Sanford to extend its reach, and Sanford is able to improve the efficiency of the organizations it acquires through “The Sanford Standard,” said Nate White, COO of Sanford Health.
As organizations join Sanford’s network, one of the first noticeable benefits is savings on supplies due to efficiency of scale. According to Mr. White, simply signing a partnership contract can result on millions of dollars of supply savings. However, standardization reaps the real financial rewards. Sanford has worked to standardize care for high-volume, high-cost services, tapping physician leaders to lead the charge to create standardized care paths and order sets. Its orthopedic service line uncovered $30 million in savings by standardizing supplies and limiting vendor options for joint replacements. Beyond that, though, standardizing clinical best practices created a “dramatic reduction in length of stay,” which resulted in a savings likely just as great, according to Mr. White.
Hon. Steve Hobs, presiding commissioner of Audrain County and a former Missouri state legislator, helped oversee the sale of Audrain Medical Center in Mexico, Missouri, to St. Louis-based SSM Health Care. The hospital had high quality outcomes, top performing physicians but one major problem, “the 
defined pension benefit plan was rearing its ugly head,” hurting hospital finances and making the system less attractive to buyers. However, the rural provider had something that was attractive: nine rural health clinics. As providers of primary care in a rural market that could extend the reach of two larger markets, Columbia and St. Louis, these centers offered an opportunity for a larger system to extend it market reach.
Audrain moved forward with SSM on a transaction, which closed in March. Audrain offered SSM growth in its primary care presence, and SSM offered Audrain greater resources and a similar culture. “We found a shared an organization that shared the same culture,” he said.
Mr. White agrees a cultural fit is critical in a partnership. “Culture is so important, and that is true. If the culture is even a little bit different, it’s hard to make changes.”
Mark Herzog, president and CEO of Holy Family Memorial in Manitowoc, Wis., said his independent hospital manages a “delivery portfolio,” similar to an investment portfolio, that includes clinical, community, operating and learning partnerships that aligns the hospital with various partners for various needs.
| Moderator Joe Lupica |
So while the benefits offered by large health systems to rural providers are sometimes more obvious, rural providers do offer benefits to these bigger systems through greater efficiency of scale, market growth and, as a result, a larger population base.
Thus, rural providers allow urban health systems the ability to further spread risk, which will be critical as population-based, risk-bearing contracts become more prevalent, said Mr. Lupica.
And it is keeping patients healthy, the panelists said, that will guide the future business models of healthcare providers. The change may take time, but eventually, the industry will reach a time “when your charge master becomes your cost master,” said Mr. Lupica.
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