Published in Georgia Health News, April 3, 2016
Written by: Andy Miller
The two deals are very different in size and other details, but the Georgia hospital combinations announced last week reflect the fast pace of such partnerships between sometimes distant health systems.
WellStar Health System announced Friday that it had just added five Tenet Healthcare hospitals in the Atlanta region, cementing WellStar’s place as the biggest health system in Georgia.
And the board of Memorial Health in Savannah approved a strategic partnership agreement with North Carolina-based Novant Health.
The partnership with Novant Health – not yet finalized – would provide a capital commitment of $295 million during the first 10 years of the agreement. Memorial Health, a safety-net system, ended 2015 with a net loss of $22 million, comparable to the year before.
Besides WellStar, two other metro Atlanta systems, Northside Hospital and Piedmont Healthcare, currently have major deals lined up.
Marietta-based WellStar’s acquisition of the five hospitals brings its total to 11, which includes recently acquired West Georgia Medical Center in LaGrange.
There are major economic forces driving hospital consolidation, in Georgia and across the nation. Health care is an increasingly competitive business, and bigger players have more clout in the marketplace.
Largely because of the Affordable Care Act, health systems in general are dealing with a whirlwind of change in payments for medical services. Government and private insurers are increasingly tying reimbursement to quality of care, instead of just paying for the quantity of services delivered. Medicare is paying bonuses and imposing penalties based on quality-of-care measurements.
Getting bigger may help hospital systems cut costs and meet the new demands for improved quality. And bigger hospital systems have more leverage with insurers in negotiations over payments for medical services.
In addition, greater size can lower the costs for medical supplies, equipment and even administration, said Craig Savage, a consultant for North Carolina-based CMBC Advisors.
“Done right, and done well, [hospitals] can gain more efficiency,’’ Savage said. They can also help with recruiting of top-notch physicians and other staff, and bring more primary care services to outlying communities, added Savage, who has consulted in Georgia.
Candice Saunders, president and CEO of WellStar, said in a statement, “With an expanded footprint, we will leverage best practices to make a difference in the health of our communities by delivering the right care, at the right time in the right place.”
The five hospitals that WellStar acquired from Tenet are North Fulton Hospital in Roswell; Spalding Regional Hospital in Griffin; Sylvan Grove Hospital in Jackson; Atlanta Medical Center; and AMC’s South Campus in East Point. These hospitals will convert to nonprofit facilities under WellStar’s $575 million acquisition. They were the only Georgia hospitals owned by Texas-based Tenet.
As part of the pending Savannah partnership, Novant will guarantee Chatham County’s 2012 agreement to provide financial support for the hospital authority’s $164 million bond issue, reported the Savannah Morning News.
“We need a capital partner,” said Harry Haslam, Memorial Health board chairman. “If none of this happens, [Memorial] will have to rely on the county subsidizing it with property taxes or shrink down to an inner-city, restricted services hospital.”
The Chatham County Hospital Authority, which owns the land where the hospital sits and leases it annually for $1, must still OK revisions before the partnership can become a reality, the Morning News reported.
Consultant Savage says Novant is a quality health provider with “a culture driven by customer service.” The North Carolina chain’s first hospital partnership in Georgia may lead to further deals here, in northern Florida and in South Carolina, he said.
Meanwhile, Savage noted, WellStar has extended its reach south of Atlanta.
The drive for health system consolidation will continue, Savage said.
But while these deals can help hospitals’ bottom lines, consumer groups warn that the individual customer may wind up paying more, not less.
“Research shows that large hospital mergers often lead to higher prices for consumers,’’ Beth Stephens of Georgia Watch told GHN recently.
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