Regarding the Vital Signs blog post “Hospital mergers need to prove value and care coordination,” I feel compelled to provide additional information to the article, which mentions PinnacleHealth System's proposed integration with Penn State Hershey.
The author may be unaware that PinnacleHealth was formed through the consolidation of Polyclinic Medical Center and Harrisburg Hospital.
The merger resulted in the elimination of 400 acute-care beds and a documented $212 million savings in its first five years as calculated by an independent economist and confirmed by the Pennsylvania attorney general. It actually lowered costs and improved quality.
Since its inception, PinnacleHealth has been and remains a low-cost, high-quality provider-and is often the partner of choice of insurers and local employers for narrow network products. PinnacleHealth's low cost-per-case is well-documented in our region.
In the late 1990s, PinnacleHealth was the first hospital in the region to contract with most insurers on a case rate system. We assumed risk for the cost of inpatient care long before any competing hospitals in the region.
The result was that PinnacleHealth managed length of stay and focused on quality and process improvements to avoid unnecessary stays and readmissions.
In the case of this article, when calling out individual hospitals and systems as examples, it's important to ensure that they do, in fact, illustrate the point the author wishes to make. In this case, they do not. We should not be lumped as a failed merger with others that have not been as successful at lowering costs and improving quality post-merger.
PinnacleHealth and Hershey were never given the chance to prove what we knew we could do. The government ignored the fact that over 60% of the services we provide are paid for by government programs (Medicare and Medical Assistance) that are not negotiated rates, and it also failed to recognize that more than half of these services are delivered on an outpatient basis, where there are many more competitors. Further, the government assumed that because you might have the capacity to take advantage of insurance companies in rate negotiations that you will; and, therefore, you are deemed guilty without ever being given an opportunity to prove what you say you are going to do. In PinnacleHealth's case, we had a history of doing what is in the best interests of the public and it was dismissed.
The article also states that providers search for capital to make the transition from fee-for-service to value-based reimbursement. PinnacleHealth's transition to new payment models has been well underway for several years. In fact, PinnacleHealth is at the forefront of implementing value-based models through risk-based contracts. For example, in 2013, PinnacleHealth was approved as a participant in the Medicare Shared Savings Program. The system also entered into regional accountable care arrangements with two major commercial insurers in 2013 and 2014.
Both agreements contained significant financial incentives and penalties related to quality, outcomes and cost. PinnacleHealth-after investing several million dollars in developing the infrastructure to manage and coordinate care-received incentive payments directly related to improved quality, outcomes and cost management.
If the merger between PinnacleHealth and Penn State Hershey had been approved, our history, experience and expertise support our position that we would have continued our tradition of providing the highest quality care and the lowest cost on an even larger scale for the benefit of a broader community.