Hospital Rivals Explore Benefits of Partnership

by Mark Friedman  on Monday, Oct. 1, 2012 12:00 am  

It might be a perfect marriage between the University of Arkansas for Medical Sciences and St. Vincent Health System of Little Rock.

But the same market forces that are encouraging the union could also make it a very stressful time to try to establish a blended family:

  • Reduced Medicare and Medicaid reimbursement rates as part of federal health care reform;
  • Even bigger cuts if Congress isn’t able to avoid the “fiscal cliff” of combined spending cuts and higher taxes looming on Jan. 1;
  • A new outcome-based payment plan for Medicaid in Arkansas; and
  • Resistance by Republican state legislators to expanding Medicaid coverage, initially at the expense of the federal government.

Both parties announced on Aug. 30 that they had started formal talks to see if there’s a way that the state-owned UAMS Medical Center could work with Catholic Health Initiatives’ St. Vincent to improve health care and reduce costs.

“We really believe to achieve the societal goals of better health care and lower costs that we really need to see some fundamental changes in the health care system,” said UAMS Chancellor Dan Rahn.

Provided the partnership talks don’t break down during the next several months, St. Vincent and UAMS will join other hospitals across the country that have partnered with competitors in an attempt to improve their financial health.

“What you’re seeing between UAMS and St. Vincent is maybe the first time we’ve heard of something like this around Arkansas,” said Paul Cunningham, executive vice president of the Arkansas Hos-pital Association. “But it’s really not surprising given the changing environment of health care that we’re entering into.”

Low Medicare and Medicaid reimbursement rates, spiraling health care costs and a sluggish economy have “ignited the national explosion of consolidation,” wrote Lisa Goldstein, an analyst for Moody’s Investors Service in her March 8 research report called “New Forces Driving Rise in Not-for-Profit Consolidation.”

“Driven by healthcare reform and an unsustainable payment system, the deep and impactful financial changes that are undoubtedly coming have led many hospitals to seek long-term partnerships,” Goldstein wrote.

In the 1990s, hospitals merged or bought other hospitals as a way to gain market share or squeeze more money from insurers because of higher patient volumes, Goldstein wrote. But “size and scale are now a more important means to gaining greater efficiencies and driving waste and costs out of the delivery system,” she wrote.

By sharing practices and pooling resources, a more efficient model for providing health care will emerge, Michael Roman, a spokesman for Catholic Health Initiatives in Englewood, Colo., predicted in an email to Arkansas Business.

He said CHI was looking for partners across the country.

“To succeed in the future, collaboration, scale and sharing knowledge will become increasingly important in providing quality care as efficiently and cost-effectively as possible,” Roman wrote.

 

 

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