Resisting the Healthcare Consolidation Frenzy

Philip Betbeze, for HealthLeaders Media , December 11, 2013

"They want that autonomy, but they recognize that standalones are under great pressure, so they have given me parameters of affiliation that are as strong as we can make them while remaining autonomous," he says.

Gianelli has pursued the state legislative route to allow NuHealth to collaborate more closely with North Shore on contracting with managed care organizations such that the two systems could enter risk contracts together and collaborate on strategy and quality.

"North Shore can help ensure we're paid appropriately by commercial managed care organizations for the services we deliver," Gianelli adds. "We suffer from limited bargaining power. We need to be connected to a larger system for our financial structure to work. North Shore is our clinical partner, but to round it out, we need this protection afforded by the collaboration bill that the governor of New York signed into law on October 24."

(The state legislation, drafted in the wake of the U.S. Supreme Court decision in FTC v. Phoebe Putney Health System, was crafted to extend the state's antitrust immunity to NuHealth, according to a statement by Foley & Lardner, LLP.)

Even without legislative help, however, Gianelli says the system is well positioned because it is low cost, but he's concerned that without help from a bigger partner in contracting, NuHealth is too low cost.

"With the passage of the collaboration bill and partnership with North Shore, we hope to be positioned in the local market as a low-cost, high-quality provider and one where the commercial managed care payments are lower than, but competitive with, other hospitals in the area," he says.

Good advice

All three CEOs say their peers should use the new landscape to their strategic advantage, as they have.

"With a smaller chassis and high-touch service with faster adjustments, we can help employers continue to provide employee insurance," says Luckett of CaroMont. "I make that argument, but it falls on deaf ears."

Mansfield cautions fellow CEOs to avoid panicking and doing a deal out of perceived desperation.

"I see so many people who are running scared, and I don't know if they know what they're scared of," he says. "In an uncertain period, it's harder to see your way forward, but focus on things you can control. Work on strategy and if you can execute, pursue that very pragmatically. Not knowing the future is not a good reason for merging."

For Gianelli, he cautions fellow CEOs to avoid making rash judgments because an independent has the advantage of being more targeted and is able to make decisions more quickly than big systems.

"You might want to remain independent, but only an honest assessment will get you there," he says. "You can't start with the conclusion."

Reprint HLR1213-4

This article appears in the December issue of HealthLeaders magazine.

Philip Betbeze is senior leadership editor with HealthLeaders Media.
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