One of Minnesota's largest health insurers has bought its way onto the board of a small Wisconsin hospital, solidifying the referral relationship between the hospital and the insurer's own tertiary-care hospital.
The arrangement, which the parties describe as a joint venture, is the second recent example of a health insurer effectively bankrolling the expansion plans of a hospital to further its own financial interests in a particular market (See story below).
The parties in the arrangement, which was announced last week, are HealthPartners, an 800,000-enrollee health plan based in Bloomington, Minn.; HealthPartners' hospital, 334-bed Regions Hospital in St. Paul; and 39-bed Hudson (Wis.) Medical Center, located just across the St. Croix River from Regions Hospital.
Under the arrangement, HealthPartners gave Hudson Medical an undisclosed amount of cash to help it build a $20 million replacement facility and new medical campus. In exchange, HealthPartners got three seats on Hudson Medical's 13-member board.
John Clymer, Hudson Medical's board president, said the deal makes HealthPartners a corporate member-or a sort of shareholder-in the not-for-profit hospital.
Also as part of the deal, Hudson Medical has signed a management contract with HealthPartners' Regions Hospital. Under that contract, HealthPartners hired a new chief executive officer to run Hudson Medical.
Hudson Medical's new CEO is Marian Furlong, former senior vice president and chief clinical officer at Central Iowa Health System in Des Moines. Furlong replaces John Marnell, who is leading the fund-raising efforts to build the new hospital.
Western Wisconsin Medical Associates, a group of 40-plus physicians, of whom about 15 are on staff at Hudson Medical, remains independent. But it will rent space on the new medical campus when it's completed.
Some of the group's doctors send their patients to Regions, said Julie Dappen, a HealthPartners spokeswoman. Also, some HealthPartners specialists come to Hudson Medical to see patients.
"It's not a new market; it's an existing market. But it's one that's important to us, so we want to build a strong and effective tie," said Mary Brainerd, a HealthPartners executive vice president.
But Brainerd said the deal carries no guarantee of patient referrals.
"Nobody commits to sending patients to us in any of these relationships," she said.
Not-for-profit HealthPartners is one of the largest HMOs in the Twin Cities. Besides its health plan business and the hospital it owns, HealthPartners has a network of 29 clinics and employs 550 doctors.
Because the city of Hudson is a bedroom community for the Twin Cities, having the small hospital remain independent was tough, Clymer said.
"Any community hospital that's independent has a decision to make with regard to capital and its ability to provide the kinds of systems that are necessary to run a hospital," he said.
Hudson Medical had operating income of almost $429,000 on net patient revenues of $14.7 million in 1997, the latest year for which information was available, according to HCIA, a Baltimore-based healthcare information company.
Richard Wade, senior adviser for communications at the American Hospital Association, said deals between hospitals and health plans can lead to better integration. But the deals, he said, may have a downside because the public doesn't trust health plans.
Brainerd described the Hudson Medical deal as a joint venture.
She said HealthPartners contributed "a couple of million dollars" to Hudson Medical, which the hospital used to buy 17 acres for the replacement hospital.
In addition, HealthPartners will match the first $1 million the community raises to pay for the new hospital. The remaining money likely will come from a hospital bond issue. When the hospital will open isn't certain.