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Nonprofit hospitals increasingly seek strategic, nontraditional partnerships: 5 key thoughts

As the healthcare industry transitions to value-based reimbursement, an increasing number of nonprofit health systems have begun entering into new businesses in which hospitals have not traditionally operated, such as health insurance or retail operations, according to a recent report from Moody's Investors Service.

Often, health systems collaborate with existing companies in these markets through the formation of joint ventures, while in other cases hospitals acquire or build the business from the ground up.

Here are five things to know about the increasing prevalence of nontraditional hospital partnerships, according to Moody's.

1. Nontraditional partnerships come in a variety of forms, including:

  • Insurance-related partnerships: Narrow networks, tiered networks, startup insurance companies, purchase of existing insurance companies
  • Consumer oriented strategies: co-branded pharmacy or urgent care centers, direct-to-employer services, new technology/health apps
  • New markets/joint ventures: Ambulatory service centers, cancer care centers, skilled nursing, long-term care
  • Care management: Clinically integrated networks, accountable care organizations, adoption of care protocols

2. The types of hospitals participating in nontraditional partnerships are typically larger health systems that have multiple campuses and a strong regional or multi-state presence, according to Moody's. This is because larger systems typically have the management expertise, critical mass and financial resources to manage the risks of these nontraditional partnerships.

3. Health systems usually use nontraditional partnerships to gain expertise in various areas along the continuum of care or to help expand the organization's presence in new lines of business outside of the system's core patient care expertise. Increasingly, hospitals are adopting the role of "quarterback" for a range of services, including skilled nursing, rehabilitation facilities and other providers of post-acute care.

4. Moody's expects a growing number of health systems to enter the commercial health insurance business over the next several years as they seek ways to improve care management and gain market share. By offering a health insurance product, health systems gain new ways to control costs, diversify revenues and efficiently track and measure patient outcomes.

5. Direct-to-employer services are also likely to continue, according to Moody's. These services also support population health management. Under such arrangements, health systems contract with large companies to provide employees with a variety of healthcare services, such as on-site clinics, nurse hotlines and health screenings. The strategy helps engender loyalty among patients to healthcare providers and can even generate future business.

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