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Why Our Independent Hospital Chose Partnerships Over a Merger

Article · October 24, 2016

In today’s health care landscape, consultants often advise independent hospitals to merge with a larger health system. The assumption is that a merger will make it easier to achieve economies of scale, develop a large but narrow network of preferably healthy patients, establish data registries, and integrate expensive technology. However, the evidence supporting mergers is uncertain at best. Our institution — Silver Cross Hospital in New Lenox, Illinois — is taking a different approach: pursuing partnerships.

How Our Journey Began

Silver Cross is a 296-bed community hospital in a county with a growing population. We attracted many new doctors when we opened a replacement hospital in 2012, ultimately doubling the size of our medical staff. Nearly all of our physicians (99%) are in private practice and are fiercely determined to remain independent. Many of them want to share responsibility in how the hospital is managed. Given our staff’s nimbleness, willingness to experiment, and strong relationships with the hospital’s leaders (in addition to external factors in our region), our board of directors concluded that pursuing strategic partnerships was the best course.

With that goal, we thought carefully about each of our clinical service lines: Are we the best at this service line? If not, can we become the best on our own? Or can we partner with the best and bring that expertise to our community? This was not a brand-new way of thinking for us: For more than a decade, we have had a successful partnership with Lurie Children’s Hospital in Chicago. Using a shared-expense model, we contract with Lurie to oversee our pediatric inpatient program and bring neonatologists to our nursery. We were determined to expand on this idea.

New Clinical Partners

Our first target for a new partnership was in rehabilitation services—not an area of expertise for us as an acute-care facility. Unsuccessful at improving patients’ outcomes, functional status, and satisfaction on our own, we approached the Rehabilitation Institute of Chicago (RIC), long rated by U.S. News & World Report as the nation’s best rehabilitation hospital. At first, we worked with RIC as a consultant but then became its partner in 2009. Our organizations created a unique financial arrangement that mirrored a joint venture (basically, an “earn-in” opportunity for RIC to participate in the inpatient income stream), but Silver Cross retained its rehabilitation licensure. Six years later, our partnership remains strong, and patients are receiving world-class rehabilitation services in the local community.

Buoyed by our success with RIC, we turned to oncology services. We sent a call for proposals to three major academic centers in Chicago. Our partnering skills were maturing, so we became more precise in our evaluation process and expectations. For example, we openly stated a preference for an institution that would be willing to partner with us for at least 10 years, and we included specific language about exit strategies. After much deliberation, we partnered with University of Chicago Medicine (UCM) in 2010. Together our institutions created a joint venture for radiation oncology, built a $20 million cancer center on the Silver Cross campus (staffed by UCM faculty), and now offer more than 100 clinical trials in the local community.

Next, Cadence Health (now Northwestern Memorial Hospital) approached us with the idea of setting up an endovascular neuroradiology laboratory, led by their star physician, who committed to being on site at Silver Cross. Given our positive partnerships thus far, we embraced this opportunity and partnered with Cadence in 2012, using our shared revenue and expense model. Silver Cross has now achieved primary stroke certification.

Five main factors make our clinical partnerships work:

    1. Joint operating committees that meet regularly. Take Silver Cross’s joint operating committee with RIC, which convenes on a quarterly basis to review Balanced Scorecard metrics on quality of care, patient experience, volume, and efficiency. The committee recently held a half-day retreat to develop a three-year plan for the program and set strategic priorities for 2016.
    2. Willingness to compromise. For example, after UCM reviewed feedback from its radiation oncology department that staffing levels were too low, Silver Cross agreed to hire more staff for the program in accordance with UCM’s proposed volume guidelines. And when the neuroscience program got off to a slow start, Silver Cross agreed to modify the original shared-income contract with Northwestern Memorial to help that partner recover some of its capital investment.
    3. Clear roles. For instance, the administrative director of rehabilitation services is an RIC employee who is dedicated to a full-time assignment at Silver Cross. He reports to vice presidents at both Silver Cross and RIC. All other rehabilitation-service employees work directly for Silver Cross. This arrangement is precise and transparent.
    4. Direct communication channels at the top. The Silver Cross CEO and each partner organization’s CEO often phone each other (as a routine or an informal check-in). Sometimes they seek each other’s opinions on strategies recommended by the joint operating committees, which comprise C-suite members (chief operating, financial, and strategy officers), so that decisions can be made and implemented rapidly.
    5. A culture of shared values. For example, Silver Cross has included UCM in its culture of patient safety and high reliability training. UCM’s radiation oncology team participates in Silver Cross’s daily patient-safety huddle, follows the Silver Cross event-classification system, and uses the Silver Cross event reporting system. Such concrete manifestations of a common culture are perhaps the most important factors in the success of our partnerships.

Our clinical partnerships allow us to offer academic expertise in a lower-cost setting, an excellent value for consumers as they shop for health care services. Partnering has also benefited Silver Cross financially during a time of overall contraction of inpatient care. Indeed, market share in each service line has grown substantially. For instance, within six years, our total-service-area market share for inpatient rehabilitation has risen by 8.6 percentage points, and the volume of discharges has nearly doubled (from 305 to 604 patients per year).

Other Types of Partnerships

With local businesses. Our IMatter™ program, launched in 2008, automatically enrolls women who complete a mammogram or get a heart screening at Silver Cross. Enrollees get discounts at more than 100 local businesses (e.g., car repair shops, hair salons, home improvement stores). Participating retailers are promoted on the Silver Cross website, at health fairs, and on all marketing collateral. IMatter has brought nearly 5,000 members to Silver Cross, given us firsthand experience in a retail environment, and expanded women’s preventive-care services in our community.

With physicians. Silver Cross became one of the first hospitals to participate in the Centers for Medicare and Medicaid Services’ Bundled Payments for Care Improvement initiative for three episodes of care. Physicians who participate in our Physician–Hospital Organization are eligible for gain-sharing under the CMS waiver, and Silver Cross has assumed the risk for the 3% discount required by CMS. In the event we exceed the discount, the hospital will equally share the upside gain with the physicians. Engaging the physicians in the program has reduced hospital readmission rates and the length of stay at post-acute providers.

With an accountable care organization (ACO). At Silver Cross we doubted whether we could optimally align our independent medical staff with the hospital in a way that allowed us to remain competitive in the new health care environment. Just as we did in seeking clinical-care partnerships, we searched the market for the best clinical-integration partner. The answer turned out to be in our own backyard. Based in Downers Grove, Illinois, Advocate Physician Partners, arguably one of the best ACOs in the country, went beyond its traditional hospital ownership model and offered Silver Cross and our Physician–Hospital Organization (PHO) the chance to join its proven clinical-integration program. Physicians are eligible to earn financial incentives according to their individual performance, the PHO’s performance, and the hospital’s performance on metrics of quality, efficiency, patient satisfaction, and safety. The program includes access to Advocate’s data warehouse and data registries.

Is our multifaceted partnership model sustainable? Only time will tell. But in March 2015, both Fitch Ratings and Moody’s Investor Service cited our successful partnership strategy as a key factor in growing our patient base and developing new areas of expertise. Collaboration is now embedded in our culture, with tremendous value for the community at large. For the foreseeable future, our independent community hospital will retain its commitment to the partnership model.

 

This article originally appeared in NEJM Catalyst on November 25, 2015.

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