Eleanor Kennedy | Nashville Business Journal
June 15, 2016
Anthem and Cigna. Aetna and Humana. And a throwback: Community Health Systems and Health Management Associates. Everywhere you look in health care, people are joining forces.
Consolidation has been the prevailing trend in the industry for years now, as players on both the payer and provider side (see Nashville’s big-name hospital companies) have announced and completed mergers designed to, among other goals, save money through combinations of certain efforts and provide bargaining power with the players on the opposite side from them.
The panel at Nashville Health Care Council’s “Shaping The New Continuum of Care”… more
Donn Jones
It’s that latter rationale that sparked an apt analogy from Narus Health CEO Michael Burcham, former head of the Nashville Entrepreneur Center and serial health care entrepreneur, during a Nashville Health Care Council panel Tuesday.
“This market we’re in is much like the U.S. and the Soviets in the Cold War,” Burcham said in response to a question on consolidation. Which side you view as which superpower, Burcham said, depends on where you work in the industry.
Both payers and providers are ramping up scale in response to the other’s moves, Burcham said. It’s a trend with some logic behind it; Travis Messina, CEO of Contessa Health, said his former employer, Vanguard Health Systems Inc., was motivated to merge with Texas-based Tenet Healthcare Corp. because even with 28 hospitals and annual revenue of $6 billion, the company still wasn’t “big enough” to move the needle on negotiations.
But Burcham, who has seen several of these consolidation waves in his 30 years in the industry, expressed some skepticism.
“Every time some financial genius tells us how much we’re going to save putting two things together,” Burcham said, but those savings aren’t always realized as expected.
The speed at which companies move through these deals, combined with the loss of smart people in the wake of a transaction, mean the hard work of integration is sometimes not given enough attention, Burcham said.
(That’s a struggle the Nashville health care community has seen play out recently at Franklin-based Community Health Systems, a company whose integration of HMA, acquired in $7.6 billion deal just over two years ago, has not gone particularly smoothly. In fact, CHS recently spun out nearly 40 of its hospitals and plans to shed more in the coming months, indicating the advantages of that type of scale were outweighed by the challenges.)
But consolidation in health care these days doesn’t always mean just mergers and acquisitions, a truth Vanderbilt University Medical Center’s Wright Pinson illustrated when he said the academic medical center sees consolidation as an “opportunity” when done through Vanderbilt’s affiliate model. As it stands on its own, Vanderbilt is in some ways “incomplete,” Pinson said.
The clinics and hospitals Vanderbilt is partnering with remain independent, Pinson said, but the affiliation between the two grows Vanderbilt’s reach and those clinics’ access to VUMC’s level of care.
A few other gems from the panel, if you weren’t able to make it:
- Patient portals aren’t the future. Fresh off the success of his Cold War analogy, Burcham threw out another laugh line, telling the audience the patient portals being built to engage patients are “just for you and your museums.” Millennials want to engage with health care through their phone, Burcham said, and that’s where providers have to meet them.
- It’s all about the data. Stop me if you’ve heard this before: Effective sharing of data is the key to health care’s transition to a value-based model in which providers are rewarded for quality, not quantity. But interoperability challenges make it hard to share that data. Still, both Pinson and Amedisys CEO Paul Kusserow expressed confidence the data needed exists, and access to it can and will improve.
Eleanor Kennedy covers Nashville’s health care and technology industries.