Of course, Tenet and other hospital operators benefit from affiliating with or acquiring doctor practices. Demand for inpatient care is sinking, and hospitals want to steer patients in need of outpatient and ancillary services such as diagnostics and imaging to places where they can capture the revenue, Dr. Shalowitz said. Hospitals also can gain more control over quality and outcomes.
Indeed, Mr. Sorrentino said, Chicago Health is seeking to build a “deep, broad” network of physicians for its ACO programs, while still offering more traditional fee-for-service payment. New doctors would be stepping into a system with experience in coordinating care for patients and payment for outcomes, he added.
Chicago Health was among the first groups in the area, in 2012, to start a Medicare ACO, devised under President Barack Obama's Patient Protection and Affordable Care Act to reward—or penalize—providers and hospitals based on how they perform on 33 quality metrics. Chicago Health System ACO has about 10,000 patients.
Chicago Health also is operating a commercial ACO for about 6,000 patients that includes Tenet's local employee population. The program is similar to the Medicare variety except that Tenet, as a self-insured employer, is the payer. Mr. Sorrentino said the group is negotiating contracts with insurance carriers.
The group hopes to grow enrollment in both ACOs by 50% in the coming year, he said.
Tenet's interest in acquiring Vanguard was tied in part to the smaller system's deeper inroads into accountable care. At the time of the acquisition, Tenet had established two commercial ACOs in California and Florida, while Vanguard was operating five Medicare ACOs.
“Vanguard has done much more, in terms of being early into" new payment models like ACOs, Tenet CEO Trevor Fetter said in a June 24 conference call discussing the acquisition. "We look at that as a complementary feature of this transaction."
Tenet posted revenue of $9.12 billion in 2012. It posted $7.22 billion in the first three quarters of 2013.
"Physicians: Tenet Healthcare wants you" originally appeared in Crain's Chicago Business.