"Unfortunately, we can hang our hat on being low cost. We haven't had the luxury of what the large players get in commercial contracting. There are models now that will hopefully let us leverage that through exchanges or even private exchanges such as the one we have with Medica [a health plan operator based in Minnesota]," he says. "We're the low-cost option. With our community-based ACO model, in order to have a larger economic footprint, we finally can leverage that position."
Other areas Phelps labels as high-risk include deals with physicians and decisions on whether to own or partner with existing physician practices.
"The higher-risk areas typically surround things like owning physician groups, which we haven't been shy to do in particular areas, but we have in others," he says.
Outside of primary care, he feels Ridgeview has done better in partnership with best-of-breed independent physician practices. Ridgeview has joint venture partnerships, which have done well by employing such groups as gastroenterology practice and an oncology group. Cardiology was another area where he says a system like Ridgeview would undergo a lot of unnecessary risk to start its own.
"What if you have bad outcomes?" he asks, for example. "All of a sudden no one's coming to your multimillion-dollar cath lab. So we partnered with one of the best groups in the market, and we're doing that through a partnership instead of organically."
Thanks to these growth and efficiency moves, Phelps see a bright and, critically, independent future.
"We're in a desirable mix of urban and rural markets that are part of the referral sources for the big ones," he says. "Everyone wants a piece of you, and it puts you in a good negotiating position. Our independence is the thing that got us here."
This article appears in the January/February issue of HealthLeaders magazine.