From left, Foundation Medical Partners CMO Robert Dorf, Southern New Hampshire Health System CEO Mike Rose, moderator Jim Merrill, Elliot Health System CEO Doug Dean and Elliot's CMO Greg Baxter, take question at an August 9th hearing on their respective heath systems forming a regional collaborative. Credit: Susan Morse
Hospital mergers have been an upward trend for six years and it's easy to see why. Hospital executives facing static or decreasing reimbursement in the transition to value look to keep margins stable by saving money through economies of scale.
From 2010 to 2016, the number of mergers increased 55 percent, from 66, to 102 deals, according to Kaufman, Hall & Associates.
A study released by the American Hospital Association earlier this year bears out the benefits or merging. It results in annual operating expense decreases of 2.5 percent at acquired hospitals, translating to about $5.8 million saved.
But hospital executives have found there can be similar benefits to collaborating, rather than combining, without the upheaval and regulatory hoops of a merger. Though there are still regulatory hoops.
The buying power in purchasing, the attractiveness of a larger system to potential physician hires, the benefit in population health analytics, the aligned data systems and the clout in contract negotiations, are still there in collaborations.
Clinically, there's the benefit of quality improvement through standardization and having an expanded scope of services.
Unlike a merger, the benefits don't materialize overnight.
Sharing the savings
Two years after Florida and Georgia health systems -- Baptist Health, Flagler Hospital and Southeast Georgia Health System -- formed Coastal Community Health, the collaborative is still in the process of initiating many of its goals set when plans were first announced, according to Carlton DeVooght, senior vice president of Operations and counsel for Coastal Community Health.
"I think with anything new there's an optimistic zeal. You need to be realistic about goal setting," DeVooght said. "The consultants will give you good advice. They also say, 'You'll save $25 million.' That is if you can turn the switch on day one. It's not like a merger or an acquisition, you can't turn the switch day one."
There's eight hospitals in the collaborative, all located about an hour's drive from one another. Together they have saved $4.9 million in having a unified supply chain. They've also realized $12 million in savings and revenue enhancements during the first 18 months, according to DeVooght.
Coastal has saved money on having a data system across all hospitals and is in the process of deciding on a unified data analytics platform.
They will be better able to track population health and currently have two of the organizations on one electronic health record.
Contract negotiations with insurers as one system faces the obstacle of having hospitals located in separate states.
All of the hospitals have retained their CEOs and local governance.
Each has retained its specialty, such as Baptist Health in endovascular neurosurgery and Southeast Georgia's pathology services.
"It was three CEOs coming from the same perspective, to continue and preserve that local delivery of healthcare," DeVooght said. "There are financial benefits, but at the end of day in healthcare, it's about providing the best quality of care."
New Hampshire's collaborative bet
As in the Florida collaborative, two southern New Hampshire health systems are aligning for reasons other than financial benefit, but the expected cost savings are impressive.
Conceptually, the combined systems represent a revenue base of just under $800 million, said Southern New Hampshire Medical Center CEO Mike Rose. If they are able to shave 3 to 4 percent off expenses, that represents a $16 to $24 million savings. The organizations think this is achievable in first three years.
Southern New Hampshire Medical Center in Nashua is on the Massachusetts border, while its collaborative partner Elliot Health System is 30 minutes north in Manchester. Both communities are of similar size.
Money is expected to be saved in capital avoidance, shared technology and better coordination of resources.
For instance, Elliot Health System uses Epic for its medical records while Southern New Hampshire is reaching the end of its current platform. The separate medical records will be run off the same system.
"We're avoiding a tremendous amount as opposed to a stand-alone install," Rose said.
The larger picture is of a shared vision for a care delivery system of the future, including value-based contracting.
Both CEOs also share the same concern for the population of aging baby boomers who are moving into the state from Massachusetts when it comes time for them to retire.
"A fairly large number are migrating to New Hampshire to escape the tax burden of Massachusetts," said Elliot Health System CEO Doug Dean.
What they aren't doing, is staying in New Hampshire for care.
"Last year, over 16,000 hospital admissions left the state for Massachusetts," Dean said. "The lion's share were not tertiary. I agree with Mike, our goal is to give them the confidence that they don't need to travel to Massachusetts for routine services."
That leaves the health systems in the position of preparing for an increasing number of patients who will need acute and chronic care.
"If we don't begin to prepare today we could experience a health crisis in acute care," Dean said. "Adding to that is the staffing required to meet the needs of the growing population."
The regional collaborative will be in a better to position to recruit physicians, and also perhaps to share a position if needed.
"This is about unifying the effort of two different cultures for two different cities," Dean said. "One thing we don't want to do is to have uniformity."
Both systems have separate collaborations. Elliot is part of the Benevera Health network, a joint venture with Harvard Pilgrim Health Care that includes Dartmouth-Hitchcock and Frisbie Memorial Hospital in New Hampshire, and also St. Joseph Hospital, which is in Nashua.
Southern New Hampshire Health is part of the six-system Granite Health and is an affiliate of Massachusetts General Hospital.
How these systems would work together is too early to discuss, the CEOs said.
With Mass General, the Nashua facility can coordinate care for surgery and offer pre- and post-care locally, Rose said.
These partnerships "are a pathway to necessity for community hospitals," Rose said.
"I think people need to remember our organizations are community trusts," Dean said. "The cost of care requires we look for new models to become as efficient as we possibly can."
The next steps include review by the New Hampshire Attorney General's office and the Federal Trade Commission. They've held public hearings and have an information website in which the biggest concern from patients is their ability to keep their current physician -- they can.
No money will change hands. Each health system will keep its CEO and there will be a regional CEO overseeing the collaborative.
The CEOs anticipate approval around the first part of 2018.
"The whole concept to bringing health systems together to create scope and scale, to be able to make an investment and spread the cost over the base of activity," Dean said. "The most fundamental concept in bringing organizations together is to create economies that come from scope and scale."