At a time when many health systems are rethinking their integration efforts, one of Texas' largest and oldest medical centers is going against conventional wisdom by merging its hospital, clinic and health plan.
In recent years, many hospitals and physician groups came together to better manage risk and present a united front to health plans. But many of these partnerships are now floundering, struggling to align hospital and physician incentives and waiting for risk to materialize. Nonetheless, Temple, Texas-based Scott and White announced last month that it is merging its 486-bed hospital, 515-physician clinic and 163,000-member health plan. The three entities were previously independent but contractually related. The clinic is for-profit; the hospital and plan are not-for-profit.
The new organization will be governed by one board of trustees and led by CEO Alfred Knight Jr., M.D., who currently serves as medical director for all three institutions. The new entity likely will be formed as a not-for-profit 501(a), a state tax structure that allows Texas corporations to employ physicians.
"By creating a single operating division, you can optimize one division at the expense of another, if the corporation has optimized its bottom line," Knight says, adding the unification will allow the corporation to negotiate for all three entities.
Wallace Lowry, M.D., president of Scott and White Clinic, admits that last year was "a difficult financial year" for the clinic and says merging will give the clinic access to capital and improve efficiency.
For the 515 physicians at the clinic, Lowry says, it will be business as usual after the merger. Those physicians likely will be the key to Scott and White's success. Says Steve Valentine, a consultant with the Torrance, Calif.-based Camden Group: "In a lot of the failed systems, they tried to assemble doctors into a medical group or assimilate doctors into a system. These guys are already in a system and already have group thinking vs. individualistic thinking."