Healthcare is ever-changing, but one theme in recent years is constant: Bigger is better. Financial imperatives are driving healthcare providers to create new business plans and consider different models of service as the focus shifts from episodic care to population health management.
Many Kentucky hospitals are expanding their scales of operations by partnering, forming alliances and, in many cases, merging to survive in a new age of healthcare. Regardless of who is in the White House the next four years (this issue went to press before the Nov. 6 election), Kentucky hospital leaders say the healthcare landscape will continue to evolve. Hospitals must adapt to it or be left behind.
“Everyone thinks scale is important under the new healthcare system,” said Dr. Michael Karpf, executive vice president for health affairs at the University of Kentucky. “We’ll have to be able to take care of populations rather than individuals.”
Population health management, which aims to improve the health of an entire population, largely using intervention and prevention strategies, is not something an individual hospital can tackle, according to Tom Weiss, president of Nashville-based LifePoint Hospitals’ Continental Division, which operates nine hospitals in Kentucky.
“We’re not quite there, but it is happening, where we’re doing more population healthcare management as opposed to episodic care,” he said. “To do that you have to collaborate. You cannot do it alone.”
That’s why healthcare organizations in Kentucky and across the nation are forming alliances and clinical relationships covering widening geographies.
Under the federal Patient Protection and Affordable Care Act, Weiss said, healthcare providers will get reimbursement rate rewards or penalties for the quality of care they provide.
“It is not the same game that I have grown up with at Baptist for the past 30 years,” said Andy Sears, vice president for planning and development at Louisville-based Baptist Health, which owns seven hospitals in Kentucky and manages two others. “Now, we have to look at how we will be more accountable for care and how we’re going to provide increased value to our patients and to the employers who are buying our care.”
University of Louisville’s University Hospital has been attempting for five years to increase its scale of operations and geographic reach by becoming part of a larger network. The hospital’s board first realized it needed a partner with a broader network in 2007, said Jim Taylor, president and CEO of University Hospital.
“We were in a very competitive market that was consolidating quickly,” he said. “We were the smallest organization in the market.”
UofL hospital still pursuing partner
For a small, standalone inner city facility like University Hospital to be successful in the future, Taylor said, it needs a partner with capital, a wider geographic reach and that can create efficiencies in back-office operations.
Late in 2011, University Hospital agreed to merge with Jewish Hospital and St. Mary’s Health Care in Louisville and Lexington-based St. Joseph Health System in a deal that included affiliation with deep-pocketed Catholic Health Initiatives in Denver. CHI’s involvement carried a $320 million infusion of capital.
Gov. Steve Beshear twice rejected the plan because of the religious affiliations it would create for the public entity.
Carrying on without University Hospital, CHI in January merged St. Joseph with Jewish Hospital and St. Mary’s Healthcare to form KentuckyOne, claiming the title of largest healthcare system in the state.
It was back to the drawing board for University Hospital, however. The university hired a consultant, formed a committee and conducted a public process to evaluate whether the issues the board saw in 2007 and 2008 still existed.
“They came to the same conclusion: The status quo was not an option,” Taylor said.
In February, the board issued a Request for Proposals soliciting a five-year deal for a partner with “capabilities, experience and commitment to include but not be limited to: critical care, facilities/operations, teaching/training and research.” Confidentiality terms are part of the RFP, as were plans to conclude it by last April 16.
UofL’s negotiations with unnamed respondents continue. In October, the UofL Board of Trustees authorized Executive Vice President For Health Affairs Dr. David Dunn to complete those negotiations and finalize an agreement. An announcement is expected by year’s end.
Alliances moving UK toward its goals
UK HealthCare has formed alliances all over the state. Its biggest is with Norton Healthcare of Louisville to focus on improving population health in cancer care, stroke and heart disease; they also began a transplant program that is experiencing success.
The Norton-UK partnership was the result of two realizations, Karpf said. Norton officials “realized they were not going into the extreme tertiary-quaternary care business,” Karpf said, and decided to partner with an academic medical center that did.
“At the same time, we came to realize that we had to focus on a broader geography if, in fact, we were going to be a real ‘referral’ center,” Karpf said.
As healthcare delivery evolves, hospitals that “dabble” in transplants and other complex care will no longer have the population and resource infrastructure to support it, he said. Those procedures will have to be performed at referral centers or “centers of excellence.” UK Chandler Hospital’s goal is to become one.
Referral centers must have a population base of 5 to 6 million people, Karpf said. Without a partner with access to a larger population, UK would never reach that many people. With Norton, it becomes possible.
In the future, Karpf said, there are only going to be 50 or 60 referral academic medical centers in the country. To become a referral center, he said, UK will have to become the tertiary-quaternary care provider for Kentucky and West Virginia, and parts of Ohio and Tennessee.
If Kentucky does not develop a referral center, Kentuckians needing advanced care in the future will have to travel out of the state, Karpf said, making UK’s goal of becoming a “center of excellence” especially important.
UK is well on its way, he said, with the UK/Norton program completing 20 transplants in the past four months. A Norton clinic in Louisville evaluates patients. Those needing transplants go to UK for the procedure and stay until stabilized. Follow-up appointments and procedures take place back in Louisville.
UK also works with Norton’s hematologists who care for leukemia and myeloma patients, and the hospitals have developed common protocols. Patients needing bone marrow transplants go to UK for that highly specialized process, Karpf said, then have follow-up appointments with their home hematologist and oncologist.
“We think we’re viable, and we need to continue to expand our reach to continue to build those numbers,” he said.
Creating seamless healthcare referral network
Other UK alliances of varying levels of formality have been formed across the state. These partnerships are not financial mergers. It is creating a network of clinical programs “that provide the right care the very first time and in the right setting and seamlessly move patients to the next facility when they need a higher level of care,” Karpf said.
Some of UK’s partners include: the Markey Cancer Center affiliates; Appalachian Regional Healthcare, a 10-hospital group whose flagship is in Hazard; St. Claire Regional Medical Center in Morehead; Rockcastle County Hospital in Mt. Vernon; Harrison Memorial Hospital in Cynthiana; and LifePoint Hospitals’ facilities that are in the central Kentucky.
Other state hospitals and care provider groups are entering formal mergers, but UK HealthCare continues its partnership approach – keeping an eye on the horizon, though. If in five or 10 years it makes sense to merge financially with another institution, Karpf said, UK will consider it.
“We have chosen not to merge and consolidate prematurely because oftentimes that causes political issues and a lot of side issues,” he said. “We’ve tried to develop our relationships in the least threatening way. What we do is help the medical staff and we help the hospital, and we build personal relationships with the doctors and the administrators. Our approach has just been less threatening and less disruptive in the short haul.”
Better bottom line, better patient care
Healthcare reform incentives are not the only reason hospitals are teaming up.
Baptist Health recently acquired Pattie A. Clay Regional Medical Center in Richmond and Trover Health System in Madisonville. For those hospitals, Sears said, becoming part of a larger system was a way to increase access to capital, upgrade services and save money.
Individual hospitals must maintain financial reserves independently, Sears said, which limits what they can spend on improvements or new equipment. Being part of a bigger network provides access to more funding and frees up reserve funds for needed projects.
Earlier this year, for example, the staff of LifePoint’s Clark Regional Medical Center cut the ribbon on its new $60 million state-of-the-art hospital and $10 million medical office building. LifePoint committed to building the new facility when it purchased the medical center in 2010.
“In all our communities, we try to keep our facilities as up-to-date as possible,” Weiss said.
Multiple efficiencies open up for health facilities in a system, Sears said. For example, a small independent hospital may require its own full-time human resources officer, but in a system be able to share one with other nearby hospitals.
Partnership or affiliation relationships allow hospitals to provide seamless referral care for patients, even in complex cases, Weiss said.
LifePoint operates community hospitals in non-urbans areas. It has more than 50 hospital campuses in nearly 20 states. Its nine Kentucky affiliates are in Versailles, Paris, Winchester, Georgetown, Mayfield, Somerset, Russellville, Maysville and Lebanon. Only Lake Cumberland Regional Medical Center in Somerset offers advanced medical care such open-heart surgery and neurosurgery. The rest refer patients to other facilities.
Establishing partnerships lets patients know they have access to the healthcare they need, Weiss said.
Because LifePoint has hospitals clusters in different areas of Kentucky, nearby hospitals can collaborate on healthcare initiatives and sometimes share specialists, Weiss said. The Versailles and Lebanon hospitals, for example, may jointly recruit a neurologist to work at both facilities, lowering their cost to expand services.
Facilities in a system often form one team to tackle an issue they jointly identify, Weiss said.
Baptist Health now has four locations on the Interstate 75 corridor: Corbin, London, Richmond and Lexington. They now offer services that complement one another, Sears said.
Both Baptist and LifePoint are interested in adding to their rosters of facilities.
Sears said he sees great opportunities for expanding in Western Kentucky. Baptist Health manages Russell County Hospital and Hardin Memorial Hospital in Elizabethtown, but Sears said the purchase of either of those hospitals is not “on the horizon.”
LifePoint is “always looking for opportunities to purchase hospitals,” Weiss said.
Editor’s Note: St. Elizabeth Healthcare in Northern Kentucky responded to phone calls and emails seeking information for this article, but did not issue comments for the story.
Lorie Hailey is associate editor of The Lane Report. She can be reached at [email protected].