Above all, Rochester, Minn.-based Mayo Clinic aims to advance integrated and team-delivered care, according to David Hayes, MD, medical director of the Mayo Clinic Care Network.
When considering how to expand Mayo's presence in a way that would promote integrated care, the organization's leaders examined the potential route of acquiring other providers. However, they decided that wasn't the best way to achieve their objective. "For now, we don't see that mergers and acquisitions necessarily lead to clinical integration," Dr. Hayes says.
Instead, in 2011, they launched the Mayo Clinic Care Network, which Dr. Hayes oversees as medical director. Through the network, hospitals and health systems across the country have entered into non-ownership clinical affiliations with Mayo to improve the quality and delivery of care in their regions. So far, the network has member organizations in 15 states, from California to New Hampshire, as well as in Puerto Rico and Mexico.
Network members get access to various Mayo resources such as the AskMayoExpert database and electronic consulting that connects local physicians with Mayo Clinic experts to answer clinical questions.
"The care network allows us to truly integrate care of patients directly across our entire practice," Dr. Hayes says. "We are not taking a subset of doctors out of our practices and forming a new company. That would be easier by far, but Mayo Clinic is about clinical integration and getting the right patient to the right doctors."
Still, some question the stability of these types of affiliations in an industry that is becoming increasingly consolidated. Additionally, while smaller organizations affiliating with brand-name providers like Mayo obviously benefit from gaining access to the larger organization's resources, what do the bigger names gain from these arrangements?
Clinical affiliation benefits for larger providers
On top of promoting better, more integrated care delivery, Dr. Hayes says the affiliations formed through the Mayo Clinic Care Network have a positive impact on the larger organization in a couple of ways.
"As we see more consolidation around the country and as there's more electronic extension of healthcare, we think it's important for us to be available beyond our brick-and-mortar campuses," Dr. Hayes says. "By having these affiliations, we think it keeps Mayo Clinic relevant. We feel it's important to be able to offer expertise at a distance which may help keep the patient at home. That way we’re relevant and 'top of mind,' even if they don't need to be seen on one of our campuses. We want to be available at a distance and there for complex issues."
Joseph Cacchione, MD, chairman of operations and strategy for Cleveland Clinic's Heart & Vascular Institute, says that clinical affiliations can be a learning experience for both organizations, based on his work helping the Cleveland Clinic form affiliations with cardiothoracic surgery and cardiovascular medicine programs in Ohio and across the country.
The Cleveland Clinic's heart and vascular affiliation program, the first such program in the country, started approximately 12 years ago and has grown by "leaps and bounds" during the past five years, with about 13 affiliates nationwide and four or five more expected to join by the end of this year, according to Dr. Cacchione. Cleveland Clinic is expanding this model to other service lines, including orthopedics and bariatrics. Through relationships with those affiliates, he says Cleveland Clinic has examined and improved its own processes, such as data acquisition and auditing.
"Whenever you have to take something out and export it, it has to be codified," he says. "Our own processes have gotten much better as we've refined them, and our outcomes have gotten better."
Furthermore, he says the affiliation program has led to growth in referrals, and it boosts Cleveland Clinic through the fees affiliates pay to enter into a relationship with the larger organization. These types of affiliations between larger, brand-name healthcare organizations and smaller providers typically have a "royalty-type" payment structure combined with fees for specific services, according to Carsten Beith, managing director of the healthcare investment banking firm Cain Brothers & Company.
"There are other financial benefits to the brand name providers," Mr. Beith says. "Nationally renowned providers like Cleveland Clinic, Mayo and Johns Hopkins benefit from referrals of high-acuity patients from their clinical networks who are willing to travel for top tier care."
Similarly, Joe Lupica, chairman of Newpoint Healthcare Advisors, says large healthcare providers benefit financially and strategically from these types of clinical affiliations. "Without the strict quality standards of a Mayo or a Cleveland Clinic, the arrangement could look like a pay-to-play rental of their brand," he says. "But if they are the best…and can teach a distant community hospital how to improve care, then they have two things going. They get a fee for their intellectual capital, but also expand."
Affiliation plans don't factor in future mergers
As for whether clinical affiliations are the first step on the way to a full merger, Mr. Beith says they can lead to acquisitions in some situations. "Often a relationship that starts with a clinical affiliation, particularly in the local market of one of the national players has a better chance of evolving into a merger or acquisition," he says.
However, healthcare organizations don't necessarily enter into clinical affiliations with mergers in mind. Dr. Hayes says the Mayo Clinic Care Network is "absolutely not" a planned step toward full-on acquisitions. However, depending on the future state of the healthcare industry, he says mergers might be in the cards. "If something were to happen that would force greater consolidation in the marketplace…. we would know these organizations well, and we would have a relationship," he says. "It's all very difficult to predict. For now we feel we're building on strength by collaborating with carefully chosen members who share our patient-centric culture."
Dr. Cacchione says Cleveland Clinic's heart and vascular affiliation program isn't about laying the groundwork for mergers at all; it's about building an actively managed network of providers for contracting purposes. "It's really about building a network of affiliates for purposes of contracting and not necessarily having the same balance sheet," he says. "Most of them do want to remain independent, and this is a solution for them to remain independent and be part of something bigger."
Maintaining independence is also the reason why Silver Cross Hospital, a 289-bed facility located in New Lenox, Ill., and Downers Grove, Ill.-based Advocate Health Care don't see their affiliation agreement — which was announced in February — progressing to a full merger in the future. Silver Cross is integrating with Advocate Physician Partners, which is Advocate's physician-led care management group.
Mike Englehart, president of Advocate Physician Partners, says clinical integration for the purpose of population health management is the focal point of the affiliation. Although Silver Cross will look and feel the same as Advocate's hospitals on a clinical basis, the hospital will keep its brand and balance sheet intact.
"We're very respectful of Silver Cross' wishes," he says. "Our full intention is that this is a clinical affiliation."
Ruth Colby, senior vice president and chief strategy officer at Silver Cross, emphasizes that the affiliation won't develop into an acquisition. "That's not where we're headed," she says. "That's clearly outlined in our agreement. We don't see that as the next step. We see the appropriate step being learning from each other about how to improve healthcare."
Care improvement and the fate of affiliations
Mr. Lupica of Newpoint Healthcare Advisors says clinical affiliations may prove to be "the alternate integration vehicle" for hospitals and health systems. He says "true integration" may result not from ownership but instead from building networks that organically create goals and incentives for providers.
"We see a future where the economic incentives of alignment around value-based health plans will govern behavior more effectively than any merged system governance can," he says. "That change could actually transform care more than all the self-interested preaching we hear from the merger industry."
However, Mr. Beith of Cain Brothers says clinical affiliations may ultimately lack the "stickiness" needed to survive. "Our experience representing hospitals that enter into mergers or acquisition is that the clinical affiliations with brand name organizations are often terminated, particularly when community hospitals and smaller systems merge into larger systems," he says. "The value of a national affiliation is often diminished when an organization affiliates with a larger system. Thus, these relationships are relatively unstable in a consolidation environment because the broader strategic issues typically overwhelm the more limited benefits of a clinical affiliation."
Still, he says the rise of consumerism and value-based payment and purchasing in the healthcare sector will likely drive a significant number of clinical affiliations going forward, as providers look to improve care quality and leverage brand name providers.
Meanwhile, providers continue to build their affiliation networks, emphasizing that providing better care, rather than amassing assets, is their ultimate goal. When Dr. Hayes of Mayo went to announce an affiliation at one of the first healthcare organizations to join the Mayo Clinic Care Network, he remembers a physician asked, "So, is this an acquisition?"
"We said, 'No,'" he says. "They said, 'Ok.' But the next question was, 'When will the acquisition occur?' I said, 'This is not a stepping stone. This is a relationship that should be viewed as improving patient care, and the needs of the patient come first.'"
More Articles on Clinical Affiliations:
Doctors Hospital at Renaissance Affiliates With Cleveland Clinic's Bariatric & Metabolic Institute
Are Affiliations Sustainable, or Simply a Stepping Stone Toward Full Integration?
Advocate Health Care Adds Silver Cross Hospital as Affiliate