September 25, 2023

Extra hospitals and well being methods are turning to partnerships as an alternative choice to mergers and acquisitions.

MarinHealth, a small well being system anchored by a 327-bed hospital within the San Francisco Bay space, is considered one of a number of methods that has maintained its independence by joint ventures and medical affiliations. The Greenbrae, California-based system has continued to develop its long-standing affiliation with UCSF Well being, giving MarinHealth entry to UCSF’s digital well being document infrastructure and its specialists. MarinHealth can also be a part of accountable care group Cover Well being, which encompasses a community of greater than 6,000 main care physicians, specialists and different healthcare suppliers within the Bay Space.

“The partnership with UCSF offers us the power to recruit quaternary-type specialists which might be second-to-none, like in neurosurgery and cardiothoracic surgical procedure,” mentioned CEO Dr. David Klein, who took the helm in September 2020.

Klein mentioned the MarinHealth board instructed him when he was employed that the well being system ought to stay impartial. Greater than two years later, Klein mentioned he doesn’t envision a state of affairs the place the group could be pressured to merge with one other system. 

That mentality has been more and more uncommon, as many well being system executives continuously survey the sphere for potential merger companions. Programs usually search mergers to unfold rising labor and provide prices over a bigger group, increase their attain, enhance their standing within the bond market amid rising rates of interest and funding declines, and enhance their bargaining leverage with industrial insurers to mitigate Medicare reimbursement cuts. 

The strain to consolidate has mounted as median days money available decreased by 23% year-over-year as of August, based on an evaluation of roughly 700 nonprofit hospitals by consulting agency Kaufman Corridor.

However some well being methods have discovered that partnerships can present related advantages to merger and acquisitions and not using a change in management and growing operational complexity.

Within the case of MarinHealth and UCSF Well being, two UCSF representatives sit on MarinHealth’s board. The ten-year strategic alliance fashioned in 2018 included medical and knowledge know-how integration and a $110 million capital funding from UCSF. The deal additionally permits MarinHealth to make use of the UCSF Well being model, and MarinHealth’s doctor areas are collectively operated with UCSF.

Fast Metropolis, South Dakota-based Monument Well being, previously Regional Well being, has additionally pursued partnerships to stay impartial. Monument fashioned a bunch buying partnership with Sioux Falls, South Dakota-based Avera Well being about 14 years in the past to bundle its buying energy. It has saved every group hundreds of thousands of {dollars} yearly, mentioned Paulette Davidson, president and CEO of Monument. 

Monument additionally joined the Mayo Clinic Care Community in 2020, giving it entry to Mayo’s analysis, diagnostic and therapy sources, which have been significantly priceless to a rural well being system like Monument, Davidson mentioned. “Monument Well being has prided itself on being impartial and have relied on the philosophy of collaboration,” she mentioned. 

Hospital and well being system merger exercise has subsided in recent times as most acute-care markets have turn into extremely consolidated. Greater than two-thirds of the nation’s 5,139 acute care hospitals had been a part of bigger methods as of January 2022, based on American Hospital Affiliation. Fifteen years in the past, the share of system-affiliated hospitals versus impartial amenities was near a 50-50 break up.

Rising regulatory scrutiny of hospital consolidation among the many Federal Commerce Fee and state attorneys normal has additionally deterred mergers, mentioned Neil Olderman, a associate at legislation agency Faegre Drinker Biddle & Reath who focuses on healthcare transactions.

“Our shoppers need to joint ventures, strategic offers or collaborative agreements rather more versus acquisitions,” he mentioned. “Due to the regulatory surroundings and shrinking variety of wholesome targets which have relevance inside a area, there are fewer merger matches.”

Durham, North Carolina-based Duke Well being and Brentwood, Tennessee-based LifePoint Well being fashioned a three way partnership in 2011. The three way partnership between the educational well being system and the for-profit hospital chain operates greater than a dozen hospitals throughout North Carolina, Virginia, Pennsylvania and Michigan. The aim was to mix the medical and high quality experience of Duke with the administration experience and capital of LifePoint.

“Sufferers need to keep nearer to house, and we thought we might present companies for care to be delivered regionally in a protected surroundings,” mentioned David Dill, chairman and CEO of LifePoint. “We pull collectively our operational experience and capital funding. With that, our volumes develop, market share expands and our high quality improves.”

The three way partnership isn’t restricted to fairness possession. The well being methods developed a care high quality program designed for group hospitals and launched quite a few medical affiliations throughout the hospital community, Dill added. “Every little thing takes place on the hospital stage relating to day-to-day decision-making,” he mentioned.

Autonomy was one of many sticking factors that led to the breakup of Renton, Washington-based Windfall and Hoag, a small Southern-California primarily based system. Hoag separated from the 52-hospital system on Jan. 31, about 9 years after they mixed. Windfall’s centralized governance mannequin allegedly stripped Hoag of native decisionmaking authority.

There had been a sequence of cultural, monetary and operational clashes, Hoag executives mentioned. As a part of MarinHealth’s break up from Sutter Well being in 2010, the hospital sued the Sacramento, Calif.-based system, alleging it had illegally diverted funneled $120 million from MarinHealth. About three years later, a choose awarded the MarinHealth $32 million.

MarinHealth, which has Marin County’s solely designated trauma heart, is buoyed by a robust industrial insurance coverage payer combine and benefited from Marin County residents’ monetary assist. That has contributed to its comparatively robust monetary efficiency in contrast with its friends. It had greater than 100 days money available in 2021, in contrast with a median of 27 days money available throughout hospitals of comparable measurement and make-up, based on Trendy Healthcare’s Knowledge Heart.

Independence ensures that MarinHealth can maintain decision-making and funding native, Klein mentioned.

“Partnerships just like the one with UCSF permit us to be nimble and make choices on the fly,” he mentioned. “It signifies that our earnings are invested again in hospital.”