The new shared services company the American Hospital Association and nearly two dozen hospital associations are forming won't compete with the giant group purchasing operations of the VHA and Premier hospital alliances.
"I wouldn't want anyone to get the notion that this has anything to do with what they do," said Richard Wade, the AHA's senior vice president of communications. "This has to do with what associations do."
MODERN HEALTHCARE reported last week that the AHA and a group of more than 20 state and local hospital associations are working together to launch a new for-profit company before year-end (March 16, p. 3).
Formation of the as-yet-unnamed company will allow state associations to sell to each other and their members some of the specialty services they've developed, such as educational programming, data products, quality indicators and benchmarking tools, Wade said.
For example, one such service would be developing a way for hospitals to avoid information systems crises as 2000 nears.
Dennis May, president of the Connecticut Hospital Association and a leader of the effort to launch the new company, added that such services as a regulatory compliance program now offered by the AHA could have been sold through the partnership.
The company, Wade said, won't sell services, such as laundry, or be involved in group purchasing. Wade also said outside vendors like ServiceMaster won't be involved.
Both Irving, Texas-based VHA and San Diego-based Premier said they were unaware of the AHA's plans for the new company.
The company will be a joint venture with the AHA and hospital associations as equal partners. Each share of the partnership costs $10,000, Wade said.
It isn't clear which or how many associations will buy a piece of the new company.
Along with May, Donald Wilson, president of the Kansas Hospital Association, is leading the effort to launch the company.
Wilson could not be reached for comment.
Although May said he couldn't talk in detail about the company because of a confidentiality agreement, he did say the company is forming in response to "very broad membership interest."
The idea for the new company grew out of a meeting of the State Hospital Association Executives Forum in 1996.
The attendees discussed facing pressure from their members to hold down dues while delivering more services, Wade said.
Starting a new company came up as a way for the associations and the AHA to share their services without duplicating efforts.
As a for-profit company, it also could make some money to replace dwindling dues revenues at the AHA and its state affiliates.
But money wasn't a driving force, said AHA President Richard Davidson.
"I wouldn't see some gigantic economic engine," Davidson said. "It's a strategy to get better services to the members and perhaps at the same time make some modest profits."
Davidson said the new company has no relationship to previous decisions by the AHA to divest its longtime fee-for-service businesses and rely primarily on dues revenues.
That strategy has taken a toll on the AHA as an onslaught of hospital consolidation has driven down its revenues from membership dues.
The local hospital associations prompted the AHA's involvement in this new venture.
"We're the glue that holds them all together on a national basis," Wade said.
A veil of secrecy has surrounded the proposed company with prospective partners being asked to sign confidentiality agreements.
Wade wouldn't release any documents regarding the company, citing that agreement.
Through a secretary, AHA board Chairman John King said he had no comment on the new company. King is president and CEO of Legacy Health System in Portland, Ore.
Former board Chairman Reginald Ballantyne said the company is about "cross marketing" services. He said he hasn't seen a proposed business plan. Ballantyne III is president and CEO of PMH Health Resources in Phoenix.
"Conceptually, the notion of state associations' sharing solid ideas with respect to services and products has great merit," Ballantyne said.
Wade said there isn't another company in the market like the proposed one. "These are things that are distinct and unique to associations," Wade said. "This is an aspect of association work. This is how to take advantage of the work of each other."
The AHA said it put up $50,000 for a feasibility study last year that found there would be a market for such a company. Wade said about 21 hospital associations also kicked in $2,000 or $3,000 each toward the study.
-With Jonathan Gardner