Hospitals Tout New Alliance’s Ability to Share Knowledge, Pool Resources
Analysts caution trend could lead to use of combined power to negotiate higher payment rates from insurers
Three New Jersey hospital systems have joined with four Pennsylvania systems to create the largest hospital alliance in the country, raising the possibility of quickly spreading best practices but also leading healthcare analysts to warn about the power of new hospital blocs.
Creation of the alliance could signal the arrival in New Jersey of a trend in which hospitals form huge networks in order to strengthen their ability to achieve large-scale savings and efficiencies.
Morristown-based Atlantic Health System, Hackensack University Health Network, and Neptune-based Meridian Health are becoming partners with Lancaster General Health of Lancaster, Pa.; Lehigh Valley Health Network of Allentown, Pa.; Reading Health System of Reading, Pa.; and WellSpan Health of York, Pa., to form AllSpire Health Partners.
The agreement creates the largest hospital alliance in the United States, with a combined $10.5 billion in revenue and serving an area with six million residents.
Each of the seven systems will be contributing $1 million to AllSpire, which is being established as a limited liability corporation. This will allow a series of joint ventures in areas like joint purchasing or information technology infrastructure.
The hospital groups said, however, that they don’t plan to negotiate as a bloc to negotiate better rates with insurers.
While applauding some aspects of the alliance, Joel Cantor, the director of the Rutgers Center for State Health Policy, said the partnership does raise some concerns. Cantor said he has no reason to doubt that the alliance has no plans to negotiate payment rates for insurance companies.
But he added, “If those entities were to merge it would create a very large and powerful hospital system,” allowing them to negotiate higher rates.
Cantor added that formation of large hospital systems has been “a worrisome trend” elsewhere in the country.
President and Chief Executive Officer Joseph A. Trunfio of Atlantic Health – which includes Morristown, Overlook and Newton medical centers -- said the goal is for the hospitals to benefit from the scale and scope of seven top hospital systems, sharing best clinical practices and potentially consolidating some operations. However, the hospital groups don’t intend to merge.
Hackensack president and CEO Robert C. Garrett and Meridian President and CEO John K. Lloyd echoed Trunfio’s comments.
Hackensack’s operations include Hackensack University Medical Center, HackensackUMC Mountainside, Palisades Medical Center and HackensackUMC at Pascack Valley, while Meridian includes Jersey Shore University, Ocean and Riverview medical centers.
“We were attracted to it because it was an alliance and not a merger,” Lloyd said during a conference call that the executives held with reporters.
But analysts cautioned the alliance is a sign that New Jersey is headed toward a future in which several large systems dominate nearly all healthcare delivery.
The alliance brings together hospital systems in an area that surrounds the growing northern and central New Jersey healthcare powerhouse, Barnabas Health System.
New Jersey Health Care Quality Institute Vice President Linda Schwimmer said the alliance appears to be an attempt to compete with Barnabas Health. She called it “an interesting development” but said “it’s too early to tell if this will be an improvement” to New Jersey healthcare.
Commenting on the stated goal of sharing best practices, Schwimmer noted “there was nothing stopping these groups” from sharing practices prior to creating the alliance. The New Jersey Hospital Association has a “robust program” to encourage hospitals to learn from successful practices at other institutions, she noted.
“It looks and smells to me as something more than” simply sharing clinical practices, said Schwimmer.
But Trunfio said that while the hospitals’ doctors currently share information, the alliance can allow this to occur systematically.
“This was a chance to formalize the sharing of best practices in a really integrated way,” Trunfio said noting that the seven systems’ chief medical officers are meeting to determine the process, procedures and policies by which sharing will occur.
Lloyd said each system will bring best practices to share with the others. He pointed to Meridian’s four-year Medicare demonstration project to provide palliative care to patients– focusing on reducing pain and improving quality of life, rather than focusing on curing diseases -- as the type of hard-won knowledge that Meridian can share with the other alliance facilities.
The executives pointed to Lancaster Health’s nationally recognized diabetes intervention program as another example of what the hospital systems can learn from each other.
Cantor said the practices that the executives were talking about doing “are all of the right things.” He noted that the best diabetes management programs rely on highly developed, well-functioning technology to track care, and that multiple hospital systems will have an easier time sharing these practices if they develop new technology together.
“I don’t think they can do that immediately – it will take some time, but it’s a good start,” Cantor said.
Garrett also said that Hackensack’s plans to become a comprehensive cancer center will lead to practices based on new research that could be shared with the partner hospitals.
Trunfio said the alliance is designed so that patients will be able to receive high-quality treatment in a “whole host of clinical areas,” improving care in each local system so that patients don’t have to travel to seek care outside of their area.
Lloyd said all healthcare systems are under pressure to improve quality and lower costs, and integrating best practices across systems and throughout the continuum of patient care, both inside and outside of hospitals, is essential.
Garrett also said he anticipates that other hospital systems will be interested in joining the alliance.
“There certainly is the opportunity to expand it,” he said. “There certainly will be a lot of interest in this.”
The alliance will work on expanding the ability to share patient records, not only between hospitals but also between doctors’ offices.
AllSpire is “only going to add staff if we really need them” to work on projects, Lloyd said.
While Cantor said the alliance has the potential to promote new initiatives, it won’t bring some other benefits often cited in mergers.
“If you want to make rapid changes, it’s useful to centralize the authority and it sounds like they’re not doing that,” Cantor said. “It’s an advanced form of negotiation among themselves.”
Because the seven partner systems won’t be sharing assets or negotiating insurance contracts together, the alliance won’t require regulatory approval, the executives said.
However, Schwimmer said the state must prepare for a future in which groups of hospitals working together have gained more power in negotiating contracts.
“We need to figure out as a state what our collective approach is going to be” to the rise of a few dominant healthcare systems, she said.