The recent announcement by the University of Arkansas for Medical Sciences and Baptist Health of Little Rock that they would partner on clinical and academic efforts might be the beginning of a long-term collaboration.
In addition to the possibility of sharing in Medicare savings, a consulting company’s report indicates that a Conway joint venture between the two organizations could be started by the end of the year, according to the eight-page outline obtained by Arkansas Business from UAMS.
“We see the Conway region as one of several areas where we can begin to enhance our positive impact on the health of Arkansans,” said the report, by The Chartis Group of Chicago, the health care consulting firm hired to advise Baptist and UAMS on areas of cooperation. The report was labeled “Privileged and Confidential – Discussion Draft Prepared at Request of Counsel.”
The document said that open issues include “whether to create a new operating company rather than utilizing the existing Conway Community Services entity and … whether the medical office building in Conway will be included in the joint venture.”
Conway Community Services is one of Baptist’s nonprofit corporations. It was created to own Baptist Health Medical Center-Conway, which opened in September 2016.
UAMS has provided emergency room and orthopedic services since the Conway hospital’s opening. In July, Baptist Health opened a $15 million 75,000-SF medical office building on the hospital campus.
The objectives of the Conway joint venture include establishing a legal structure for the partnership, creating financial projections and refining and beginning “to execute [a] joint business plan,” according to the document.
UAMS spokeswoman Leslie Taylor said in an email to Arkansas Business last week that UAMS had nothing to announce in connection with Conway.
The projects between Baptist Health and UAMS that were announced Aug. 29 include trying to improve Arkansans’ health, which usually ranks near the bottom on nationwide assessment surveys.
“Our goal is to improve population health and to prepare ourselves for the challenges we see in health financing,” said Interim UAMS Chancellor Stephanie Gardner. “So the idea is to keep people healthy … and out of our facilities.” Gardner and Baptist Health President and CEO Troy Wells were interviewed together in Gardner’s office late last month.
Both UAMS and Baptist said they will maintain their identities as separate institutions while working together.
The partnership between Baptist Health, which has nine hospitals in Arkansas, and the state’s academic health center intensifies the competition for CHI St. Vincent, which has the fourth-largest hospital in the state ranked by revenue. CHI St. Vincent has hospitals in Little Rock, Hot Springs, Morrilton and Sherwood. CHI St. Vincent also has a management agreement with Conway Regional Health System, which operates the legacy hospital in Conway.
In 2012, CHI St. Vincent started talks with UAMS about forming an affiliation or alliance to save money. Because St. Vincent is affiliated with the Catholic Church and UAMS is publicly owned, an agreement between the two was fraught with church-state complications, and those talks ended in 2013.
Chad Aduddell, the CEO of CHI St. Vincent, declined to comment on the alliance between UAMS and Baptist Health, which has its flagship hospital in Little Rock.
Others didn’t seem worried about Baptist and UAMS working together.
“They are two major entities that probably feel that they can combine and do even more,” said Peggy Abbott, president of Ouachita County Medical Center. “I don’t know all of the ins and outs of it, but I think right at this point in time, I’m not highly concerned about it.”
Abbott said that large hospital systems forming partnerships is a trend across the country, although typically they are actual mergers. Baptist Health and UAMS stress that they are not merging, calling their partnership an alliance.
The management consulting firm Kaufman Hall & Associates LLC of Skokie, Illinois, reported that 58 mergers and acquisitions between hospitals and health systems had been announced in the first half of 2017, compared with 52 during the same period the previous year.
Mergers between large organizations with revenue in the $1 billion range or higher also are becoming more common. Through the first six months of 2017, six such partnerships were announced compared with four in all of 2016, Kaufman Hall said in a July news release.
Baptist Health had total revenue of $1.01 billion in 2016 and UAMS had total operating revenue of $1.45 billion for the fiscal year that ended June 30.
Kaufman Hall said it expects more large health systems to join up.
“As the field of potential partners evolves, leaders of many large health systems are thinking strategically about how best to build the scale and capabilities needed to remain competitive in a rapidly changing health care environment,” said Patrick Allen, the firm’s managing director. “Health systems across the country are looking to grow and transform their operations to ensure stability in the face of turbulent times.”
The latest attempt to repeal and replace the Affordable Care Act failed last week when Senate Republicans said they didn’t have enough votes to pass the Graham-Cassidy bill. Majority Leader Mitch McConnell, however, vowed to keep trying to repeal Obamacare.
Baptist Health’s Wells said that the health care industry is facing a difficult future with the uncertainty of health care funding.
“It’s challenging today,” he said. “We believe that by working together, by collaborating in areas that make sense, that we’ll both be better prepared and more successful than if we didn’t. And that’s part of the reason why we’re doing this.”
Baptist Health and UAMS have worked together previously on several projects, some of which date back to the 1980s. For example, UAMS has worked with Baptist Health for a number of years on services including vascular surgery and maternal fetal medicine.
About a year ago, Wells and Dan Rahn, who retired as UAMS chancellor on July 31, talked about ways to formalize the collaborative work. “We were trying to find some synergies and solve some problems,” Wells said.
He said both agreed that they could build on the services they provide and could do more.
Around April, Wells and Rahn hired The Chartis Group. By collaborating, they thought they could improve health care in Arkansas. “I think I remember Dan saying, ‘How can we do good by doing more good?’” Wells said. “And that’s been the shared vision of this.”
Accountable Care Alliance
Through this new partnership, formally called the Baptist Health/UAMS Accountable Care Alliance, the two organizations could share the millions of dollars saved if they hit savings goals set by the Centers for Medicare & Medicaid Services.
The Accountable Care Alliance will manage the care of about 36,000 Medicare patients in Arkansas. If the alliance in 2018 spends less than the set $395 million benchmark on those patients, it could share in the savings. The most Baptist and UAMS could receive is about $20 million each, which would result if the Alliance spends 10 percent less than the benchmark.
The alliance poses some risks, however, because spending more than $395 million could mean each organization would owe CMS money, up to a cap of $4.7 million if excess spending eclipses 4 percent of the benchmark total during 2018, or $411 million.
But Baptist and UAMS are counting on the advantages of the partnership outweighing the risks.
“The Accountable Care Alliance will allow Baptist and UAMS health care providers to access the health records of those Medicare patients, even if they didn’t go to one of their locations,” Wells said. That should result in slashing the duplication of services that typically occurs when a patient travels between different health systems.
“So it’s as much about getting the data you need to understand what’s happening with patients, identifying those who are high risk for either bad clinical outcomes or high costs that are unnecessary,” Wells said. “And then creating strategies that you can deploy out into the medical community of those participating physicians to help them do something about it.”
Wells said the patient information will be shared with the patient’s primary care doctor, who may not know, for example, that the patient has been going to a hospital’s emergency room three times a month.
“Today, in many cases, unless the patient calls and tells them, they don’t know that’s going on,” Wells said.
A second, similar partnership between Baptist and UAMS involves working with Arkansas Children’s Hospital; Arkansas Blue Cross & Blue Shield, the state’s largest insurance provider; and Bost Inc. of Fort Smith, which provides services to people with disabilities.
They recently formed Arkansas Advanced Care to serve Medicaid recipients with behavioral health and developmental disability conditions.
The AAC operates as a provider-owned Arkansas Shared Saving Entity under legislation approved this year by the Arkansas General Assembly.
The AAC will work to “provide high-quality care, good outcomes and new strategies to keep costs low,” Gardner said.
The companies in the AAC could share the profits if the benchmark goals are met.
The details, however, are being worked out.
Increasing Doctors a Goal
In the graduate medical education arena, UAMS and Baptist plan to work together to add more than 100 doctors over five to 10 years, Gardner said.
“We’re cognizant of the fact that we have a lot of hurdles to try and address,” Gardner said. “Another big hurdle is making sure that we have the workforce that we need for the future.”
Wells said the aging of the health care provider population “is a big challenge that’s looming over us.”
One difficulty is that there are more medical school graduates nationwide than there are residency slots, but to become a licensed doctor, a medical graduate has to complete residency training.
UAMS, which has about 800 residency slots, will add residency positions at Baptist Health Medical Center-North Little Rock.
Gardner said that within five years, 60 slots will be added and in the 10th year, between 100 and 120 positions are expected to be in place. UAMS will start with family medicine and internal medicine and expand the residencies to include other specialty areas.
Wells said the intent of the affiliation is to “take advantage of what both institutions can do together to do more good.”