In today’s health-care industry, hospitals across the country must “go big or get out,” a national expert said.
Paul Keckley, a health-care research and policy analyst and retired executive director for national health services research firm Deloitte Center for Health Solutions, was among the speakers at Summa Health System’s annual Community Leadership Briefing on Friday in downtown Akron.
Part of the discussion at the event focused on Summa’s recently completed partnership with an auxiliary of Cincinnati-based Catholic Health Partners, the state’s largest health system.
Summa completed a deal last month giving HealthSpan Partners a minority ownership stake for $250 million.
Catholic Health Partners (CHP) restructured the deal for 30 percent ownership of Summa after the local Catholic Diocese leader recently refused to approve the partnership.
Under the modified agreement, Health-Span Partners, a secular, nonprofit auxiliary organization of CHP, made the investment in Summa.
“The HealthSpan-Summa relationship is both logical and strategic and, frankly, it just makes sense,” Keckley told the crowd of more than 200 at the Akron-Summit County Public Library main branch.
The hospital industry is more financially challenging than most, Keckley said.
“This is an industry that is labor intensive, capital intensive and highly regulated at a state and federal level,” he said.
These types of deals are becoming increasingly common nationwide as health systems face even more challenges from health-care reform and pressure to lower costs, Keckley said in an interview before Friday’s event.
“The cost of operating in this environment is going up and the margins are going down,” he said. “If you need capital to fund clinical programs that are state-of-art, which is the appetite for most Americans, than accessing the capital requires a leverageable balance sheet.”
During his speech, Summa President and Chief Executive Thomas J. Strauss agreed, saying “the future of health care is about scale, population health and the value of care rather than volume of care.”
Summa leaders repeatedly have said it needed a larger partner to help navigate changes in the health-care industry, particularly a movement toward paying hospitals for managing people’s health and keeping them well and out of hospital beds.
By working together to lower supply costs, improve efficiency, boost productivity and enhance performance in other areas, Summa estimates it can achieve about $60 million in annual savings, Strauss said.
“It’s all built around the focus on improving quality and reducing cost,” HealthSpan Partners President and Chief Ken Page said during a panel discussion at the event.
Catholic Heath Partners’ revenues have remained relatively flat during the past seven or eight years, forcing the hospital system “to get more efficient” to keep its expenses lower than revenues, said President and Chief Executive Michael Connelly, who participated in the panel discussion.
During Friday’s event, Strauss also announced that the health system provided $116.1 million in “community benefit” in 2012 — an increase from $106.7 million the previous year.
To keep their tax-exempt status, nonprofit hospitals report the free and reduced-cost care and other community health services they provide.
Last year, Summa’s net cost for providing charity care was $20 million, Strauss said, up from $14.3 million in 2011.
Likewise, Catholic Health Partners provided $385 in community benefit last year and expects the figure to top $400 million this year, Connelly said.
“It’s against our written policies to pursue a bankruptcy against anybody who gets care from us,” he said.
Cheryl Powell can be reached at 330-996-3902 or firstname.lastname@example.org. Follow Powell on Twitter at twitter.com/abjcherylpowell.