The rolling implementation of the Affordable Care Act is transforming the way health care organizations deliver services. The promise of lower-cost, more effective and efficient care has spawned a wide range of partnerships, including once-unimaginable affiliations between religious and secular, public and private institutions.
But a new vision of how to compete successfully under a new regime — driven by new quality standards and reimbursement rules — has forced institutions to dig deep within. In many cases, that has meant redefining their vision, mission and values so they can be positioned not only to survive but thrive and, most importantly, to continue to serve their patient populations well into the future.
New Vision, New Mindset
The first change required is one of mindset, and that entails a shift in which traditional competitors might come together as collaborators.
"The way health care is being reimbursed has changed dramatically from a model where we were paid historically on volume to a new model based on the value we provide client populations," says David Feinberg, M.D., president of UCLA Health System and chief executive officer of UCLA Hospital System. That fundamental shift, he says, has forced UCLA to alter its traditional view of competition vs. collaboration.
Under the old model, doctors who were part of the Los Angeles-based system focused on service-line advertising for specialties such as hip replacements and other procedures. According to the new model, Feinberg explains, "the focus is on health and wellness management and larger than one institution." In UCLA's case, that often extends across a broader geography and from the beginning to the end of life — serving all the needs of the target population. "Collaboration makes much more sense when you get to that kind of scale," he notes.
Orange County, Calif., presented a somewhat different situation, according to Deborah Proctor, president and CEO of St. Joseph Health in Irvine, which was rooted in a shared vision to better serve the health care needs of its communities. In February, St. Joseph announced the formal completion of an unprecedented affiliation with Hoag Memorial Hospital Presbyterian, a regional health care delivery network also in Orange County.
"In Orange County, we don't have a public health system," Proctor says, "so about five years ago, several CEOs of hospitals in the county met to address the gaps in health care in our community and, as we explored the issues, we couldn't find a countywide solution that would work. When we met with Hoag, we decided we could better meet the needs of our communities together. Ours was a moral imperative to act. In Orange County, the needs may be less obvious, but there is an extremely diverse population of poor without an organized system for accessing care."
With complementary geographies and shared principles, she explains, the two institutions could respond far better together than if they worked individually within a more traditional model. "We looked at the needs of the county as a whole and aligned our resources to meet them," Proctor says.
While organizations such as St. Joseph Health and Catholic Health East, based in Newtown Square, Pa., have long, proud faith-based traditions, it is the social mission to serve, particularly those with few resources and little access to health care, that is the overriding imperative that motivates these new partnerships.
"When [Catholic Health East] first began talks with Trinity, we were working independently with local ministries. But with health care reform looming — and the shift from volume to value as well as decreases in reimbursement from government payers — we recognized we had to change, too, if we were to continue to take care of the poor in our communities," says Judith Persichilli, interim president and CEO of the merged entity, CHE Trinity Health, the nation's second largest nonprofit health care system.
As talks continued with Trinity about what the two organizations could do together to bring greater value to local ministries, the CEOs determined that a shared services model would enable them to enlarge critical mass, thus lowering the cost and raising the benefit of service that would inure to their respective local ministries. They also were determined to share intellectual capital and learn from one another as well as undergo clinical transformation to better serve their populations. "That's where the real savings are in health care reform, so we decided it would be best to merge," she says.
Rod Hochman, M.D., president and CEO of Providence Health & Services, Renton, Wash., describes a similar process. "We knew we had to be aligned from a mission standpoint. If that doesn't fit, the rest of the work won't succeed," he says. Up front, he explains, Providence assessed the intent of prospective partners and the logic in terms of serving communities. "It has to make sense from the perspective of the communities we serve," he notes. "There has to be payback in terms of decreasing the cost of care in the community and improving quality and access to care."
In 2012, Providence and Swedish Health Services, based in Seattle, formed an affiliation in which Swedish formally joined the Providence Health & Services' five-state health care system while remaining a separate, secular brand. The affiliated system now includes 32 hospitals, 400 physician clinics, senior services, supportive housing, and many other health and educational services employing more than 64,000 people across five states.
"We had known each other for a long time," Hochman says. "We knew there was great potential for a more efficient model that would lower cost and improve access. We ended up doing an exhaustive analysis — and that external validation is crucial for boards — but, interestingly, the benefits we first talked about turned out to be what we got."
Making the Vision a Reality
Envisioning a future that allows those who require care greater access at lower cost is one thing, but there is a great deal of heavy lifting involved in making the vision a reality.
For starters, any two organizations that are looking to join forces — whether as formal merger partners or as part of a looser federation — and reap the planned benefits of efficiency and greater access to care have to be aligned on a common vision of what the future will look like and what each will contribute.
Proctor suggests starting with a few fundamentals. "Most important, the leaders must share a vision," she says. "It's essential not to overcomplicate the issues or to feel you have to answer every detailed question in the initial phase." As she describes the process, it's a triage system: "Quickly get to the few things — literally, maybe three essential elements — you must have agreement on, which will determine whether the relationship will proceed; other details can be worked out over time."
One significant stumbling block — and the root cause of the failure of many partnerships that looked good on paper — can be the need to merge two cultures.
"Culture is always the biggest challenge," Persichilli says. But it starts at the top, she observes: "Integration won't go forward until you identify the people who constitute the new leadership. Then top leadership has to put aside its own needs and goals and focus on the mission of the new organization and what you are trying to accomplish. Leaders have to recognize it's not about you but something much larger, longer-lasting, and more worthwhile than just one person."
Once the leadership is chosen, the rest of the integration can begin. "As integration teams start putting together the organizational chart, they have to be continually mindful that their selections reinforce the mission, people, desired clinical transformation and stewardship of the new entity," Persichilli says, "drawing on the strengths of both organizations."
In one case, turning a vision into reality meant ensuring an organization had the right structure to succeed. "When the Affordable Care Act was enacted, our board asked a simple question: 'Is Ascension structured properly to achieve our strategic direction?' " says Anthony Tersigni, president and CEO of Ascension, the parent company of Ascension Health, the largest Catholic and nonprofit health system. To answer that question, management worked with a consulting firm to determine whether its current structure would serve it well in the future.
"We interviewed stakeholder groups, had discussions with our board, drafted a white paper with the organizational requirements needed to support our strategic direction, and then discussed the results with our sponsor, Ascension Sponsor," he says.
Ascension ultimately determined it needed two separate governance bodies. The Ascension Health board would focus on the delivery of services and the Ascension board would focus on the larger picture: sustaining services across that continuum.
One program that has been made possible by this reorganization is a health city being built in Grand Cayman with a partner in India.
"Our goal is to transform health care in the Caribbean and South America using our knowledge of how to create cost-effective, high-quality health care solutions," Tersigni says. "This never would have been possible without the bifurcation, which also increased our clarity, focus and accountability."
When Providence and Swedish affiliated, there was a focus on resolving key governance issues. Initially, five members of the Swedish board joined the Providence board, says Hochman. The legacy board at Swedish remained intact as its community board, responsible for quality, medical staff affairs and other local matters. So, for example, while capital would be approved at the level of the system board, the community board works with the local executives to develop and approve the local budget.
"I've been doing this for 30 years and the governance changes went extremely well," Hochman says. "It's important at the front end of discussions to resolve critical issues, and each organization worked with a consultant to ensure we could do that. Because we had resolved the major issues up front, we were ready to execute on our plan on Day 1."
Maintaining Focus
It's important to keep fundamental goals in the forefront when combining organizations if they are to accomplish what they set out to do.
"For me, the fascinating part of all this is the role of leadership as we transition from the old way to the new way," UCLA's Feinberg says. "How do you manage jumping from one canoe into another as large organizations go through transformation? You have to maintain a clear, true-north focus — you have to be patient-centered. Will it be right for the community? For friends and neighbors? People want convenient, low-cost, compassionate care in which they are involved as partners."
To maintain that focus, Feinberg says, no decisions are made without patients in the room and every meeting starts with patient stories, to remind everyone of why they are there.
To stay on track, "communicate, communicate, communicate," Tersigni advises. "And you've got to maintain transparency. Change is difficult and often misunderstood, which can lead to problems."
"We continually remind ourselves that we are doing this work to build a stronger financial foundation to allow the local ministries to do their work, and clinically integrated networks enable them to better serve their communities," CHE Trinity's Persichilli notes. "United in this way, we can be a more powerful force to advocate for the vulnerable in our society."
Any organizations seeking to come together should hold the vision of the future as most essential; that is the crux of a successful partnership. "Once we knew we were aligned on a vision," Proctor says, "we had fewer challenges. We had to ensure we were doing this for the right reason, which was to respond to a community need. As we continued to remind people of that focus, the other challenges dropped away."
David Nygren, Ph.D. (david@nygrenconsulting.com), is founder and JoAnn M. McNutt, Ph.D. (joann@nygrenconsulting.com), is senior consultant, Nygren Consulting LLC, Santa Barbara, Calif.
