Concentrated in the center of Michigan, Sparrow Health System was doing quite all right: an integrated delivery network with nearly 800 beds spread across five hospitals, an HMO, a PPO and more than $1 billion in annual revenue. But it wasn't sufficient for a future that could hit community hospitals hard.

"We need to be making sure that we can provide tertiary services to the community," says Jonathan Raven, a longtime board member. "There's an awful lot of de-emphasis on inpatient stuff, but there will be certain things that need to be done in-hospital." Ramping up to a more complex, high-level clinical operation called for help from outside: a partnership with Mayo Clinic, Rochester, Minn. "Mayo is enormously skilled at practicing in a hospital environment at those very, very high levels," Raven says.

Hartford (Conn.) HealthCare had similar aims. Five years ago, it began to build an integrated delivery network that focused on administrative and functional areas such as financial, information technology and legal services, says Elliot Joseph, president and CEO. Today, the system has five hospitals with bed sizes ranging from 156 to 867. While that created advantages in improving efficiency, decreasing costs and generating expertise, an insufficient amount of attention was drawn to the core mission of patient care. Hartford's leadership identified an existing large program for cancer care as a capability to greatly elevate, and reached out to Memorial Sloan Kettering Cancer Center, 112 miles southwest in New York City.

There's no future for run-of-the-mill service lines and performance. Hospitals will have to become entities that can handle specialized, complex services using cutting-edge standards of care. "With the revolution that the Affordable Care Act is bringing about, and the additional things that are going to happen with population health — as an outgrowth of that and because it's good practice anyway — the hospitals that were once community hospitals will either continue to raise their levels of quality and services, or they will be left behind," Raven says. "Relationships that bridge the information gap on the best, most efficient ways of getting quality medical results for every patient, that's what you have to strive for."

For Sparrow Health System, Mayo's tertiary expertise is only part of the infusion of professional expertise and intellectual capital, says Dennis Swan, Sparrow's president and CEO. "It's really transforming this overall integrated system to be a player in population health," he says. Mayo figures to enhance an emphasis on ambulatory care as well as "pre-hospital and post-hospital care" across the continuum.

Fundamental Reasons

The exercise of franchising the medical know-how of big-name specialty academic and research centers is not new. But the motivations of both the renowned organizations and their community hospital affiliates are more fundamental and urgent, and successful transplantation of innovation and specialty precision can pay off as health reform boosts the idea of clinical excellence as a business strategy.

Boards are familiar with the concept of a financially obligated organization, which seeks to attain good bond ratings, establish credit, arrange favorable financing and so on, says Joseph. "We began to apply that very same theory or concept to the notion of clinical care." The goal, he says, is "to create a clinically obligated organization around cancer care."

The board vision statement is to be nationally respected for excellence in patient care, and to be most trusted for personalized, coordinated care. "That is our business proposition as a not-for-profit health care provider. There's no question that the line of sight between this alliance of Memorial Sloan Kettering and Hartford HealthCare advances us in enormously big steps toward that vision," Joseph says. "We believe if we achieve that vision, in this case with cancer care, the business case will take care of itself."

Memorial Sloan Kettering also sees its elite position in cancer care as a business asset with legs. "There are two ways to become relevant in health care," says MSK Executive Vice President John Gunn. "One, you can be so big that you can't be ignored. The other is you're the best of what's out there — you provide the best service, the best clinical care. In the future, it is more likely that the best clinical care will win out." The Affordable Care Act is fostering differentiation based on quality, he says, "and to the extent that Hartford HealthCare is a quality player in the cancer field, that is an extraordinarily powerful survivorship model as opposed to just getting bigger and bigger."

A driver on the MSK side of the partnership was the ability for Hartford to offer access to clinical trials, "which is the best way to take care of cancer patients," says Gunn. MSK has about 16,000 new cancer cases a year, and Hartford has 6,000, which "is a very good number," says Wendy Perchick, MSK senior vice president of strategy and innovation. "It indicates to us that there'll be adequate volume, which is really required for excellence, and that it also speaks to the size and scope of their resources and how much they dedicate to cancer care," she says.

Continued local control also is on the minds of community network partners. The dissemination of Mayo knowledge to Sparrow is "an integration without a merger," Raven says. "It's not equity, there are no board seats, there are no merger discussions. The three ‘nots' are important to what it is."

However, health systems that seek to retain their independence by building a clinical reputation could be neglecting half of the survivability equation, according to some experts looking at business realities of the post-reform era. Prices are going down, costs are going up, reimbursement from Medicare and Medicaid is trending down, and the ability to function under value-based payment requires big investment in IT systems and in organizing for new payment approaches such as bundled payments, says Rex Burgdorfer of Juniper Advisory, an investment banking firm with a health care emphasis.

"The conclusion most boards we work with have reached is that a much more rational industry structure is needed, meaning the creation of larger companies that have better access to capital and are better able to do the things that are going to be required from health care reform," Burgdorfer says. "Our blunt assessment is that while service-line affiliations and branding may have some merit in certain cases … in the vast majority of cases, they are an attempt that is not going to correct the overwhelming changes to how they need to do business."

An option that combines clinical and financial benefits is a partnership that marries clinical reputation and operational acumen, he says. A budding venture between LifePoint Hospitals, a for-profit company in Brentwood, Tenn., and Duke University Health System, an academic medical center in Durham, N.C., is pursuing that approach. Each contributes its strengths to a joint venture seeking community hospitals to buy and bolster, which Burgdorfer calls the hospital industry's "most important trend in the last two decades."

Spreading Know-How

Whether or not the clinical excellence route suffices for a business strategy, the movement of renowned tertiary centers into other communities is spreading for reasons related to mission, marketing and critical mass. For prestigious medical centers, the concentration of treatment innovation at a small number of patient destinations is causing capacity problems, and it's beginning to run counter to an argument for providing care close to home, for financial and patient-recovery reasons among others.

One reason Mayo Clinic started a care network, which is up to 28 members, was a concern about continued relevance in the evolving health care environment. The organization, with locations in Jacksonville, Fla., and Scottsdale, Ariz., in addition to Rochester, has more demand than capacity, says David Hayes, M.D., medical director of the care network, so at times it means patients are told they don't need to come, or they might not get an appointment right way. "If you do that too often, you may become less relevant," he says.

Ideally, though, Mayo would prefer to see the hardest cases on its medical campuses and be able to provide Mayo-class care for the remainder in community settings, he explains. "We treat all kinds of patients, but our real sweet spot is treating those patients with the most complex disease, what we call quaternary care."

If the network initiative can extend expertise regionally, and help to keep patients close to home, "then we think that's good for the patients, it's good for the regional care center and it's good for Mayo, because it shifts our profile of patient to those more complex patients. In the broader scheme, it keeps the Mayo name top of mind, and relevant in a very rapidly changing health care landscape."

The still-daunting mission of curing cancer has progressed considerably but at the expense and required expertise of coordinated, multidisciplinary clinical teams adept at complex protocols, says Melanie Wong, vice president of strategy and business development for MD Anderson Physicians Network, a division of Houston-based MD Anderson Cancer Center. The physicians group is responsible for operating a network of collaborating community hospitals and health systems.

MD Anderson delivers a staggering amount of care, receiving 35,000 new patients each year on a campus of 15 million square feet, or the space taken up by 260 football fields. But Wong says that its mission calls for substantially more patients and capable professionals to speed up the work.

"We feel that cancer will be eliminated best through a team-based approach. There's no one organization that is going to solve the problem by itself. We've tried that, our peers have tried that, it's not going to happen. We need vast numbers of people, and patients, working on this problem nationally to solve it. We're trying to grow our footprint so we can further this mission."

Picking Partners

Selecting community partners with the talent and organizational structure to cut it at the required higher level is serious business, Hayes says. "We consider people for membership who are culturally and philosophically aligned with Mayo. So they have to be patientcentric organizations, and they have to get through the due-diligence process without any issues." Then an internal approval process commences, including review by several leadership bodies within the Mayo organization, he says.

MD Anderson has to see in a prospective partner some aspects of a promising program, Wong says, plus dedication to quality, which comes from physician engagement; cultural synergy; commitment to a partnership; and clinical compatibility. "We have the ability to work with any organization at any level, as long as we have jointly the time to do that." If the program is small, with insufficient ability to handle the minimum amount of readiness, MD Anderson will work with it and advise it on the development "until they have evidence of the ability to do multidisciplinary care." The success rate for those that go through this phase is "99 percent," says Wong, including small rural hospitals without the necessary infrastructure at the outset.

Now with 13 "certified" network members, including four added in the last nine months, the Houston cancer center is operationalizing an approach in which it "templatized 70 years of MD Anderson clinical care and research into a program that is transferrable and scalable," Wong says. "It's a very rigorous program, both in getting ready … to be an MD Anderson affiliate and once the organization becomes an affiliate, it's a very high-touch, high-service, high-interaction relationship." The network itself was set up as a separate supporting company of the state-owned medical institution.

That approach contrasts significantly with that of MSK, which has had a New York-area network for nearly 15 years but "owns the sites and employs all the people who work there," says Gunn. The cancer center considered Hartford "a good distance from us," but decided to extend its reach that far in its first foray into tapping into community health systems it considered amply prepared.

Hartford was in the early stages of putting an integrated network together and "had five separate really good cancer centers at five different locations," says Joseph. Those centers "had pockets of excellence everywhere, but they were disconnected." With cancer care going through a major transformation, the health system saw the MSK infusion of knowledge in part as a way "to move from five cancer programs to one cancer program at five locations," he says.

It's also improving network-building overall. "The ability to acquire the expertise around clinical trials, around disease management, around multispecialty care teams — and to use the process and structure of MSK across our entire Hartford HealthCare Cancer Institute — was a great organizing principle for us."

What Hartford board vice chair David Hyman calls a strategic alliance enables MSK-level care delivered to every patient, even those in the smallest Hartford hospital. "It wasn't just a loose affiliation; we wanted to make sure we weren't just slapping someone's logo on our department, and that we were going to develop a program that was going to be world-class," he says.

Clinical-Financial Combo

The days of affiliating with a prestigious clinical program for its marketing value are over, says Burgdorfer of Juniper Advisory. "Sprinkling a fancy name on one particular service line or another doesn't solve very many of the underlying changes to the business fundamentals."

But an emphasis on finance, operations and economies of scale won't be sufficient either. LifePoint learned lessons from a nearly 10-year association with Duke at one of its community hospitals and saw a need to package both good management and superior clinical quality in an acquisition strategy.

Back in 2005, when LifePoint acquired 151-bed Danville Regional Medical Center, the Virginia hospital's performance on core clinical quality metrics, particularly in cardiovascular services, was not meeting LifePoint expectations. Operating without the backup of a large tertiary center for such assistance as review of cases, standard protocols and the latest techniques in cardiac care, some outcomes "were not what we were looking for," says Eric Deaton, Danville's CEO since 2010.

Given an existing Duke partnership with some Danville practitioners, LifePoint invited the tertiary center 50 miles away in North Carolina to help educate and support local cardiologists, and two cardiac surgeons from the Duke faculty moved into the community. The three-way initiative produced "tremendous results," says Deaton: a mortality index ratio of 0.7 for 2013, which beats the average of the top major teaching hospitals as calculated by Truven Health Analytics in its 100 Top Hospitals annual performance survey. "We really just do not have any mortality with our cardio open-heart patients because of the support we get," he says. Other programs for patient safety and quality improvement have been introduced in the past several years.

In the wake of health reform, Duke was getting many calls from smaller, independent hospitals in North Carolina and southern Virginia focused on the need to be more efficient, deliver high quality, attain the scale to control costs and attract doctors, says William Fulkerson, M.D., executive vice president of Duke University Health System. The problem was, "I'll be the first one to say that operating hospitals in nonurban areas is not our core strength," he says.

Knowing what happened in Danville and having developed a relationship with LifePoint Chairman and CEO William Carpenter III during that time, Fulkerson says he worked out with Carpenter a joint venture, Duke LifePoint Healthcare, that "really does combine the clinical and patient-safety expertise of Duke and the operational and financial resources of LifePoint." Established in late 2011, it has acquired six hospitals and has partnerships pending that potentially would add six more to its network.

Like other prestigious institutions with patients from outside the region, Fulkerson says, "It is as important to Duke as it is important to LifePoint that we keep patients in their community hospital setting if that's the right place for them to be," as long as the hospital gets the clinical excellence right.

"In a world of transparency that we're continuing to evolve in, it's going to be more and more obvious who's delivering the best care, the best service," he says. "I honestly don't think you're going to be a successful hospital in any sense of that word unless you can demonstrate high-quality outcomes in a safe environment."

John Morrissey is a freelance writer in Mount Prospect, Ill.

MSK Builds Alliance Competency

When Memorial Sloan Kettering Cancer Center announced its partnership with Hartford (Conn.) HealthCare in September 2013, it soon found that the arrangement wasn't likely to be the only one. "Actually, we're fighting off the other opportunities," says John Gunn, MSK executive vice president. Several hospital organizations wanted to immediately become an affiliate. But they have to wait for MSK to get the first one right.

"When we first brought to our leadership the concept of this alliance," says Senior Vice President Wendy Perchick, "the first question was, ‘Are we going to help to improve care of patients with cancer outside of our own doors?' If we were going to that — and that was the standard they were going to hold us to — then they were very enthusiastic about this.

"It is why there have been armies of people who have been at Hartford HealthCare," she says. "We have so many interdisciplinary meetings going on, and so much review and discussion. At the end, if we expand this, it's because we're making a difference in the care provision that can be looked at, shown, published, etc."

One reason to keep the alliances within "a couple hundred miles of the New York area" is the time it requires of MSK people, who are hard at work daily already, Gunn says. "We believe the Hartford experiment, if you will, is going to be an extraordinary success, in which case, at our trustee level, we will be investigating an approach in which we will create an affiliate team practicing to be able to do this on a continuing basis, and that may be the way we end up expanding this."

One criterion for a partner will be its number of cancer cases, which is "a good proxy" for other qualifications, Perchick says. There also has to be a demonstrated interest in engaging in clinical trials, "which is really about a commitment to improving the standard of care." In addition, prospective partners have to be planning or already have in place a clinically integrated organization. "It's hard to provide cancer care in the 21st century without a lot of clinical integration. It's really complex care now."

That partly explains the slow-and-steady approach. What MSK is trying to do at Hartford and eventually others "is essentially make these folks part of our system," Gunn says. "This is a really important issue for us; it's about where we focus our efforts and energy. I don't think our intent is to blanket the world with quasi-MSK sites." — J.M.

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Alliances with renowned medical centers yield not just clinical expertise, but also operational and cultural guidance. For more, read "Sharing the Wealth of Knowledge".