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July 22, 2014

RMC draft plan recommends partnership with larger hospital network

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Posted: Sunday, July 6, 2014 12:55 am | Updated: 1:56 am, Sun Jul 6, 2014.

Anniston's top hospital could partner with a larger health care network in the coming years to survive in the face of rising costs and declining revenue.

Regional Medical Center's recently drafted three-year strategic plan identifies some major challenges facing the hospital. Chief among them is that the days of standalone regional hospitals like RMC are numbered, and to continue serving the area, the Anniston facility must partner with a larger health care network.

RMC administrators and some health care experts say hospital partnerships and consolidations are a growing national trend to boost negotiating power with insurers, buying power for new technologies and to solve staffing shortages in the face of rising health care costs and decreasing revenues.

"It's do or die," Dr. Vikas Saini, president of the Lown Institute, said of standalone regional hospitals' need to partner with larger networks. The Lown Institute is a Massachusetts-based think tank that focuses on health care issues.

Saini said partnerships and consolidation of hospitals are definitely a nationwide trend.

"Hospitals are not only merging with each other, but they're bringing in more physicians and employees," Saini said. "And it's being driven by many factors in the marketplace."

David McCormack, CEO of RMC, said he agrees that partnerships and consolidations between hospitals are a trend that will only continue. McCormack said he expects the RMC board to vote on the strategic plan in its upcoming July meeting, including whether to seek a partnership with a larger hospital network. Consulting firm Healthcare Management Partners compiled the plan.

However, McCormack stressed that the board has no interest in selling RMC outright.

RMC is an Anniston-based, nonprofit hospital with a board composed entirely of members appointed by local governments, such as the Anniston and Jacksonville city councils.

"The board can't even do that, only the city can do that," McCormack said of selling RMC.

McCormack said RMC would look at its options, but would likely partner with UAB Hospital. RMC already has a limited partnership with the Birmingham-based hospital, which is affiliated with the medical school and research centers at the University of Alabama-Birmingham. It allows RMC patients access to cancer-related clinical trials offered by UAB.

Saini said rising health care costs have been the main driver for partnerships and consolidations among hospitals over the years.

"The cost of health care in the country is way out of line compared to other countries," Saini said. "There's a growing sense that this stuff can't go on, and when you think about what that future might look like, consolidating and bulking up makes sense."

Pooling resources

Rosemary Blackmon, vice president for the Alabama Hospital Association, said she has seen a trend toward affiliation among hospitals across the state and country in recent years.

"Any sort of agreement that gives additional buying power, staff and expertise in certain areas, we're definitely seeing an increase in that," Blackmon said.

Blackmon said there is an increasing need among hospitals to pool their resources, due to decreases in revenue and reimbursements from Medicare and Medicaid in recent years.

"At this point, we're definitely seeing revenue decrease, especially when that's compounded with the rising cost of providing care," Blackmon said.

Dr. Mike Morrisey, professor of health economics at UAB, said the pooling of resources has several advantages.

"There is the argument that it leads to greater efficiency ... that all the providers are working on the same page ... so they can better coordinate their services," Morrisey said.

Saini said hospital partnerships can also help in negotiations for reimbursements from insurers.

"If the provider network has a monopoly in the area, it has better bargaining power," Morrisey said.

McCormack said that theoretically, a full partnership with UAB would help RMC better negotiate with insurers.

"With big players, you've got more clout," McCormack said.

McCormack added that RMC would likely gain access to more grant money for new programs, money to upgrade technology and increased staff through a partnership with UAB.

"There is expected to be shortages in the future of medical professionals ... this will help us recruit and they can shift some staff over here if needed," McCormack said.

Saini also said the sharing of staff is a benefit of partnerships, particularly for more rural hospitals.

"If a large system takes over a large hospital and provides rotating specialists to them that they might not normally have, that would be good for patients," Saini said.

Arguments against

However, Saini said, there are potential downsides to hospital partnerships. He said that with a constant need to keep up revenue, there could be increased pressure on the partners to perform more services and tests, even if they might not be necessary.

"It could create an atmosphere that more is better and so patients might be getting things they might not have wanted or actually needed," Saini said. "There is a potential for harm there to the patient ... every procedure has some level of risk ... and yes, it could all lead to higher costs."

Morrisey said increased consolidation of hospitals could also lead to the same problems inherent with monopolies.

"There is a concern that by consolidating, you'll reduce the number of competing hospital providers, and so the others will be able to raise prices," Morrisey said.

 

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