The announcement this month of a collaboration agreement between the Western Connecticut Health Network and New York’s Northwell Health is the latest evidence of a growing trend for players in the health care space: Look for opportunities to join forces or risk being left behind.
“This is absolutely indicative of a trend across the whole country,” said Keith Safian, CEO of Safian & Co., a hospital and health services consultancy in Armonk, New York. “In my view, it’s the main driver in the business right now.”
Safian knows whereof he speaks: He’s the former president and CEO of Phelps Hospital in Sleepy Hollow, from which he resigned in 2014 after 25 years in the post when the community hospital was acquired by the North Shore-LIJ Health System, which rebranded as Northwell Health in 2016.
“I think this is a brilliant move on the part of both organizations,” he said. “Western Connecticut has a wonderful reputation and is a strong market leader. Northwell (headquartered in New Hyde Park on Long Island) has no presence in Connecticut, but is already one of the largest nonprofit hospital systems in the country.”
Northwell claims to be the largest private employer in New York state, with 63,500 employees, and the 14th largest health system in the U.S., with 23 hospitals and about 650 outpatient facilities in the metropolitan area, including Westchester County, where it also acquired Northern Westchester Hospital in Mount Kisco in 2014.
The Western Connecticut Health Network comprises of Danbury, Norwalk and New Milford hospitals, which together employ about 6,300 people. It also encompasses 70 Western Connecticut Medical Group medical and subspecialty practices across 16 communities; the WCHN Biomedical Research Institute; and Western Connecticut Home Care, formerly the Danbury Visiting Nurse Association.
The agreement allows the two systems to jointly explore developing clinical programs and services, collaborate in providing population health services, and leverage the expertise of each other’s health systems. The collaboration with Northwell will enable WCHN to increase access to high-quality, affordable care in the communities it serves in western Connecticut and adjacent counties in New York.
In addition, Northwell will provide WCHN with access to its network of shared services, including purchasing channels, data analytics, supply-chain management expertise and workforce development opportunities available through its corporate university.
The relationship is intended to enable WCHN to grow clinical and operational efficiencies, create clinical and professional development opportunities, and further strengthen its ability to deliver high-quality care and patient experience, according to WCHN President and CEO John Murphy.
“We are proactively managing our transition to value-based care by collaborating with local and regional organizations that share our vision and values,” he said in a statement. “Leveraging (Northwell’s) areas of expertise will enable us to sustain excellence and growth as the health care industry rapidly evolves.”
Other recent WCHN collaborations include a partnership with the Connecticut Children’s Medical Center and a cancer care partnership between Norwalk Hospital and New York City’s Memorial Sloan Kettering Cancer Center.
For Northwell Health, “Since we’re geographically contiguous and physically practice in each other’s area, we saw this as a great opportunity,” said Mark B. Schiffer, Northwell vice president of strategic alliances.
Schiffer said talks between the two organizations began about 15 months ago. “We approached them and talked about what the possibilities were and where we saw health care going in our region,” he said. “We began to explore whether there were opportunities to do things that would be mutually beneficial, and that ultimately led to the agreement.”
Schiffer characterized the collaboration as a “move towards more value-based practice. which focuses on quality, safety, patient satisfaction and innovation.”
The agreement, he added, is representative of a general move in health care from the fee-for-service model to value-based standards. In the former, a service is provided and a fee paid, with little in the way of personal interaction.
“More and more health systems and individual practices and hospitals are moving towards keeping people healthy rather than wait until they’re sick, and to demonstrate that quality of care in measurable ways,” Schiffer said. “Patient satisfaction can be measured through surveys, but there are also a multitude of other quality metrics that we follow.”
Schiffer said no money changed hands in the transaction and that WCHN and Northwell will continue to operate as independent health care networks, maintain their respective executive leadership teams and board governance structures and be responsible for their own operations, assets, liabilities, and finances. “This is purely a collaboration,” he said.
Still, its ramifications could prove to be considerable. Anu Singh, a managing director at Kaufman Hall, a national management consultancy with a Wilton office, said the deal “is likely to cause more rethinking of historical geographic, network and service line boundaries” in the region.
“This is similar to many other parts of the country where large organized systems of care are being developed and structured,” he said. “The participants in these arrangements include a variety of players, including health systems and hospitals of all types, physician groups, payers, other health care providers and even new entrants to the space.”
As for the value-based component, Singh said: “Models that cite ‘value-based’ reflect an understanding of the tectonic shift in the industry. As this is new territory for the industry, there is more time and learning that the industry will undergo to ensure successful achievement of the new model.”
“Organizations like these and many others around the country have the requisite scale, expertise and orientation to be best positioned to realize success,” he added.
Kaufman Hall reported that hospital and health system transactions announced in 2017 totaled 115, up 13 percent from 2016 and the highest number recorded in recent history.
Eleven of those transactions involved sellers with net revenues of $1 billion or greater, a record number of mega-deals. For providers with revenues between $500 million and $1 billion, there were 16 transactions in 2017, compared with just one in 2009.
In addition, the total number of transactions in 2015 and 2017 was roughly the same at 112 and 115, respectively. But the aggregated revenue of organizations involved in deals last year was $63.2 billion, nearly double the $32 billion in aggregated revenue reported in 2015.
“The new solution” for health care delivery “will be harder for smaller entities to execute and coordinate,” said Singh, “and so greater alignment is very likely to be required.”
“All health care systems are feeling the financial pressure to do better with less,” said Northwell’s Schiffer.
Safian said patients will benefit from such collaborations. “These kinds of deals can reduce health care costs by reducing X-rays, lab work and other tests that might otherwise have to be repeated at the different facilities,” he said. “Having integrated medical records is a terrific benefit to patients.”