Most hospital or health system mergers, acquisitions, partnerships and affiliations historically have involved providers in the same town, city or—at the farthest geographically—county. Now, local hospital and health system mergers have become the minority transaction type as providers are reaching across county, state and even regional lines to find compatible partners.
These long-distance relationships can offer organizations a number of clinical and financial advantages. To reap those clinical and financial rewards, the partnering hospitals and health systems must have three critical pieces in place.
- Clinical expertise
A reason hospitals and hospital systems are entering into long-distance relationships is clinical. By seeking far-away hospitals or health systems with a particular clinical expertise, a provider can make a clinical service—say in cardiology or transplant—available to its local patient population immediately rather than developing their own expertise. Given the clinical complexity, it could take months if not years to bring such services to a local market.
- Care coordination
Another clinical benefit is care coordination. Patients who need specialized care, or care that’s not available locally, can now stay in the same system for that care rather than seeking it from an unaffiliated provider. That enables better coordination of patient care by clinicians across healthcare settings, which, in turn, leads to better clinical outcomes and higher patient satisfaction.
- Value-based payment models
A hospital with a full-range of services and capabilities resulting from a long-distance partnership can bundle services around a specific type of care and offer that bundle to payers for a fixed price.
Population health-based payer contracts can put a hospital or health system at financial risk for a given population. In that population, a hospital may have a subset of high-cost patients with specific medical needs that it can’t address on its own. By partnering with a hospital that has that medical capability the contracting hospital can effectively care for that subset of high-cost patients, improving their health status and lowering their cost of care.
Three factors critical to success
Given the clinical and financial benefits that can come from long-distance hospital and health system partnerships, it’s important that the organizations get it right. The partnership needs to be: well-structured, well-managed, and well-communicated.
When we’re talking about well-structured, we’re talking about how well the partnership is set up to handle all the clinical and financial data and information that will flow among and between hospitals, including physicians, and among and between the organizations and payers. Are your health IT systems interoperable? How will claims for services be submitted? How will revenue from those services be dispersed? Better to have all that worked out up front than trying to figure it out after the deal is signed.
The long-distance partnership also needs to be well-managed. The ability to manage the arrangement or address management issues when they come up can be hampered by the geographic distance between the parties as you can’t walk down the hall or across the street to resolve an issue. Consequently, it is important to spell out lines of accountability ahead of time. The same goes for who is in charge. Which CEO or board has the final authority? I’ve seen hospitals and health systems try co-CEO arrangements, and they can be quite challenging to say the least.
Finally, long-distance hospital partnerships must be well-communicated. The geographic distance between hospital partnerships can magnify cultural differences. It’s not enough to have good internal communication systems. They must be great internal communication systems. Whether that’s monthly, weekly or daily status calls, internal newsletters or an intranet site to share information, there should be no surprises between partners, and any issues should be dealt with immediately.
Hospitals and health systems that take these steps can make their long-distance affiliations successful for both patients in terms of better health and for organizations in terms of better business. Geographic distance can become an enabler, rather than a hindrance, to reaching these strategic objectives.