HFMA 2017: Affiliations, not acquisitions, may be path to value-based care

Transitioning to value-based care and taking on risk is often cited as one of the drivers of the consolidation trend throughout healthcare. Some systems, however, are beginning to look at partnerships more “holistically,” according to Kaufman Hall managing director Anu Singh, MBA, by pursuing creative affiliations to enhance their capabilities rather than a merger or acquisition.

Singh’s Tuesday presentation at the Healthcare Financial Management Association (HFMA) conference in Orlando will focus on two case studies, both of which involve separate organizations working together without fully integrating.

“They’re thinking about breaking down the lines between payors, providers and clinicians in ways where those entities that were once thought of strict, separate verticals are now being thought of as potential collaborators in their model,” Singh said.

The first of the two case studies is the 2015 joint venture between Tenet Healthcare, Dignity Health and Ascension Health to operate the Carondelet Health Network based in Tucson, Arizona. Singh said Ascension was thinking about leaving the market altogether due to lagging behind competitors in the market. Tenet and Dignity were already working together in an accountable care organization and expressed interest in adding Carondelet to their network.

This did involve a financial arrangement, as Tenet became the majority partner in a new joint venture operating Carondelet, with Ascension taking “a small minority piece,” according to Singh, but it allowed the companies to rival other systems in the region.

The second case study involved no organization ceding control, illustrating what Singh calls “the continuum of types of transaction” available to health systems. In a partnership called Vivity in Los Angeles and Orange Counties in California, Anthem Blue Cross came together with seven competing hospitals, including Cedars-Sinai Medical Center, Torrance Memorial Medical Center and UCLA Health System.

“It’s a jointly capitalized joint venture between the payor and those seven hospitals to create a network—and a pretty narrow network—that allows them to coordinate care, that allows them take on risk and passes on that benefit to the hospitals and helps the hospitals migrate from a fee-for-service model to starting to think about value-based initiatives,” Singh said.

The model has existed since 2015 and has grown to between 25,000 and 30,000 members, with the hospitals able to offer services at prices “10 to 20 percent” lower than other networks in the market.

Measuring success in these new arrangements is difficult, Singh said, since they’ve only been in existence for a few years. How he hopes other healthcare leaders judge it by weighing these partnerships against other options, like trying to amass the resources to pursue a value-based transition or a practical population health management strategy all alone.

“Absent the pursuit of some of these ventures, it’s unclear that some of these hospitals could do anything to change the trajectory of their organization to have a prayer for population health management,” he said. "It's not just simply, 'Let's just merge with someone else' or 'Let's go buy that.' There's also new types of transaction structures that can align people but don't require economic consideration or even governance to substantially change."