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Stratus Healthcare
A group of 23 hospitals in Georgia last week introduced a not-for-profit limited liability corporation called Stratus Healthcare.

New collaborations

Providers partner to gain population health expertise

By Beth Kutscher
Posted: July 27, 2013 - 12:01 am ET

The push to manage population health may be fueling consolidation across the healthcare industry, but some systems are pushing back with looser partnerships that allow them to retain some independence and present fewer regulatory hassles.

The moves come as the Federal Trade Commission has been scrutinizing hospital mergers and acquisitions as a driver of price increases.

“The FTC has been very aggressive in stopping them,” said Axel Bernabe, a healthcare antitrust attorney at law firm Constantine Cannon. On the other hand, “the FTC appears to be very willing to let organizations associate.”

During the past two weeks, in markets 900 miles apart, two new non-equity alliances have been formed to pool resources, coordinate information and gain population health management expertise.

A group of 23 hospitals in central and south Georgia on July 23 introduced a not-for-profit limited liability corporation called Stratus Healthcare, which was conceived as a way for its members to collaborate while remaining independent. It grew out of the April 2012 partnership between Central Georgia Health System, Macon, and Tift Regional Health System, Tifton.

The partnership is one of the largest of its kind in the country, said William Richardson, president and CEO of Tift Regional. He added that the goals of the alliance include establishing and exchanging best practices, creating an information technology “nerve center,” reducing costs and collaborating on population health.

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News of the group's formation comes less than a week after Abington (Pa.) Health and two Philadelphia-based systems, Aria Health and Einstein Healthcare Network, similarly formed a non-ownership limited liability corporation focusing on population health management.

The first phase of that initiative will focus on jointly managing the healthcare benefit plans for the systems' 32,000 employees. Although the employees won't be in a single risk pool, the partners may be able to select a single third-party administrator, carrier and IT provider—with the greater goal of developing population health management expertise, said Larry Merlis, president and CEO of Abington Health.

The second phase involves developing a network of “clinically integrated but independent providers” as well as reaching out to other employers to work with the group, Merlis said. The final piece involves forming partnerships with payers. “For this market, we're at the forefront of this,” he said.

Both collaborations are part of a growing number of alliances that aim to embrace a looser partnership model instead of a formal takeover agreement. In October, for instance, four systems in Missouri and Illinois formed the BJC Collaborative as a way to take advantage of the benefits of size and scale without losing their autonomy.

Stratus' members represent not only acute-care hospitals, but also post-acute-care providers, and other groups may join the alliance in the future, Richardson said. The alliance currently includes 1,700 physicians and 16,000 employees.

The Georgia healthcare landscape is divided between the four or five integrated systems that dominate the Atlanta market and the largely unconnected hospitals in the rest of the state, said Ninfa Saunders, who joined the Central Georgia Health System as president and CEO in September. Rural hospitals across the country that have been unable to find partners have faced a number of challenges, and some, including two in Georgia this year, have been forced to suspend operations.

“The one thing I thought was missing was the ability to coalesce this region,” Saunders said. “As opposed to competing with each other, you can come together for a common goal.”

A governing body consisting of the CEOs from each of the medical centers will oversee the Georgia alliance. The members chose the model because it was a quicker route to working together—and because they were reluctant to cede control. “They really want to be independent,” Saunders said. “No one wants to do mergers and acquisitions.”

Stratus will focus initially on developing networks for primary and specialty care as well as creating hospitalist and emergency medicine programs that will allow members to create clinical guidelines, establish transfer arrangements, share information through telemedicine and learn from best practices. Saunders said the members intend to adopt the performance goals of an accountable care organization without participating in a formal shared-savings program.

Merlis of Abington acknowledged that the third phase of the Pennsylvania initiative may require regulatory approval for the partners to jointly form contracts with payers—something generally prohibited without a legal change in ownership status. “The intent for this is to phase in the initiative over a period of time,” he said.

While the collaboration required for ACOs and other forms of clinical integration may lead to some concerns about decreased competition, Bernabe pointed to the FTC's advisory opinion on the arrangement between Norman (Okla.) Regional Health System and the independent Norman Physicians Association.

Even though the groups acknowledged that price increases were possible, the FTC decided that the Norman Physician Hospital Organization—which is not an ACO but is structured with a similar framework of quality and efficiency benchmarks—would have a net benefit for patients and payers. “Because they were talking about clinical integration, they let them go,” Bernabe said.

Follow Beth Kutscher on Twitter: @MHbkutscher

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