Issue link: https://beckershealthcare.uberflip.com/i/351959
18 Question: Do you see hospital affiliations becoming more popu- lar? If so, what do you think is driving that popularity? Michelle Conger, senior vice president and CSO of OSF Healthcare System (Peoria, Ill.): Absolutely [they are] becoming more popular. There are many reasons people seek an affiliation, but a large part of it is the transforma- tion going on in healthcare in terms of payment models. It's really difficult to build all of the things necessary to support pay for value independently. I think hospitals are looking for partners to really be able to share in those types of capabilities. There are a million kinds of affiliations, all perhaps driven by something different. Smaller hospitals are looking for partners, not a full acquisition necessarily, but a partner who can help them access those capabilities. Wayne Griffith, CEO of Princeton (W.Va.) Community Hospital: I believe affiliations in some form will continue to be popular. The ever-changing healthcare landscape will most likely draw healthcare leaders to look seri- ously at affiliations. The basic survival instinct will cause some organizations to seek affiliation opportunities. The oversupply of healthcare resources in some areas, coupled with changing delivery models, may necessitate affilia- tion exploration. Still others may focus on affiliations as a means of quality improvement. I believe that a lot of the past activity has been tied to mergers and consolida- tions, including the activity in our state. Clinical affiliations are an alterna- tive to mergers, providing a low level of integration. Also, clinical affiliations provide a vehicle for the enhancement and integration of healthcare services. We are all trying to meet the needs of our community. Affiliation arrange- ments can be successful when both parties have the same goal of preserving community-based healthcare. Dean Gruner, MD, CEO of ThedaCare (Appleton, Wis.): Popularity ebbs and flows, but is more on the uptick right now. I think in times of uncer- tainty, people are driven to look at bigger decisions [like affiliations]. In the past, the motivation has been to leverage with payers. If you think about that, to leverage payers to pay them more, that increases costs to the community. If you believe the value equation is quality divided by cost, then that decreases value to the community. It does make it easier to run our organizations if we're paid more, and that's sort of the challenge for all of us: It's a good thing for us to have more revenue, but that is somebody else's cost. Doug McMillan, CEO of West Park Hospital (Cody, Wyo.): I'm definitely seeing an increase in rural hospitals looking to affiliate with larger facilities. It's driven by number of issues; the biggest being the lack of resources avail- able in rural communities. It may be driven by not having access to a larger group purchasing organization that can lower their purchasing cost, or not having access to specialty physicians. For some looking to affiliate, the big issue is access to capital. Because of what's happening in the industry, that's a major concern right now. From our experience here, we have not chosen to affiliate; we have not seen a need. We have good working relationship with other larger hospitals, de- pending on the service line. We can reach out to them without any formal af- filiation. We've had a management contract with Quorum Health Resources for 27 years. It's proven to be extremely beneficial and thus is the reason we have chosen not to seriously affiliate with a larger entity. It provides us with resources we might not otherwise have. Michael F. Stapleton, President and CEO of Thompson Health (Canandai- gua, N.Y.): Our local environment is going through several affiliations; it will likely hit its peak pretty soon. As we look at the risk-based contracts we are all heading towards, it is too much risk for a community hospital to enter into one. We need to be part of a larger system that can have a risk-based contract for 2 million to 4 million covered lives. That was part of our goal [when we affiliated with UR Medicine (Rochester, N.Y.) two years ago]. We were and continue to be a very strong community hospital with growth potential. It was the right time to negotiate, as opposed to negotiating from a bad financial position. Well-performing community hospitals are start- ing to see the light [and realize] the time to negotiate is when you are in a strong position. Q: What do you see hospitals looking for and what should they be looking for in an affiliation partner? Ms. Conger: I think they're looking for people who really do have the IT, care management or health analytics capabilities — services that are hard to build — built in the system already and have the ability to extend those capabilities beyond their own health system. I think a lot of organizations are looking for analytical expertise, [which is] difficult to build if you don't have some sort of scale to build it. A lot of people are looking for a like culture, making sure they have the right cultural fit with the organization they choose as a partner. A lot of organizations, too, are looking to sustain care in the community [they're in] at an affordable cost. So there's some opportunities to share or reduce the cost of care by sharing some services. Mr. Griffith: Frequently, some hospitals are just looking for a quick solution to a deteriorating situation. That could very well lead to a lose-lose result. Hospitals should be looking for partners with similar cultures, missions and values. The culture of organizations affiliating must be similar to facilitate meaningful and open dialogue among participants. We sought a partner that also had a reputation for high quality. A high level of trust is also a key ingredient. Our level of trust and respect was built over a number of years. Lastly, the current financial strength of both organizations is a big plus in that it will allow the focus to be on improving patient care. "It does make it easier to run our organizations if we're paid more, and that's sort of the challenge for all of us: It's a good thing for us to have more revenue, but that is somebody else's cost." — Dr. Dean Gruner, CEO of ThedaCare "Affiliation arrangements can be successful when both parties have the same goal of preserving community-based healthcare." — Wayne Griffith, CEO of Princeton Community Hospital Note: Responses have been edited for length and clarity.