Adventist, St. Joseph Form JOC as Population Health Strategy

Executives at the two Northern California health systems say the joint operating company is needed to serve remote and rural populations of mostly Medicare and Medi-Cal enrollees.

The recent announcement that California's Adventist Health and St. Joseph Health will integrate clinical services under a joint operating company comes as regulators in the state are taking a renewed look at healthcare consolidation.

In March, the California Attorney General’s Office filed a lawsuit alleging that Sutter Health—the largest health system in Northern California—is engaged in anticompetitive practices that are raising healthcare costs for consumers.

The AG’s complaint came shortly after a new report showed how the rapid consolidation of healthcare markets in California has led to rising healthcare costs for consumers throughout the state.

Despite those potential headwinds, Jeff Eller, president of the Northern California Region for Adventist, says he's confident that the JOC with St. Joseph's will survive regulatory scrutiny.

Eller spoke with HealthLeaders Media about the proposal. The following is an edited transcript.

HLM: Why are you entering the JOC?

Eller: We are two strong and prestigious healthcare systems that are both faith based. We come from different faith traditions but we have a common goal, and that is to better serve our communities. The best way we could do that and preserve our religious identities was by forming a joint operating company, which would reserve powers back to the sponsors for the religious identity and unique missions that they've been proud of for so many years, in some cases over 100 years.

HLM: How are you splitting the revenues under this JOC?

Eller: The governance is 50-50. We have a 10-member board and Adventist Health and St. Joseph's each will have five members. The governance is straight up 50/50. When it comes to the presumptive splits on the economic side, St. Joseph's is 69% and Adventist Health is 31%. They came to the table with a little bit larger organization.

HLM: Concerns have been raised about healthcare consolidation in California and its effect on the prices consumers pay for healthcare. Do you think this will adversely affect your JOC proposal? 

Eller: There is always that chance. I think we are a whole different story. We serve rural communities that are predominantly Medicare and Medi-Cal. In Lake County we are almost 80% governmental payers.

There is not a whole lot of contracting that takes place out there. This really is about a population health strategy and securing and strengthening healthcare access in these smaller rural communities.

HLM: Is the JOC a merger by another name?

Eller: We are forming a JOC. We are coming together to form an organization that will manage the day-to-day operations, that will help develop strategies, and ultimately help us to create value back in the communities that we both serve.   

HLM: Is this JOC in response to healthcare consolidation in Northern California?

Eller: This is more about how do we strengthen and secure healthcare access in this region that is predominantly rural. It is sometimes quite difficult to recruit a single specialist into these communities but by having a little bit of scale we are able to work together to recruit physicians, build care networks and secure the safety net that is so important for these rural communities.

HLM: Is the regulatory bar lower with a JOC than with an outright merger?

Eller: No one has told me that. The regulatory screens are going to be in front of us. Our narrative is going to be about how we can improve care for these communities and how we can transition from fee for service to value, but the screens are still going to be there.

HLM: Will your role change under this JOC?

Eller: Our roles as leaders absolutely will change. But if you are doing it from the perspective of leadership, you do what is right for the organizations you've been asked to lead and the communities you represent. It makes it a lot easier. You are stepping out but you're called to do that in leadership from time to time.

(Eller will remain president of the Northern California Region for Adventist, and he will oversee hospitals and clinics that are not part of the JOC. In addition, Eller will still be active with those hospitals in the JOC, as board chair of Adventist Health Ukiah Valley, Adventist Health Feather River, Adventist Health Howard Memorial and board secretary of Adventist Health St. Helena/Adventist Health Vallejo and Adventist Health Clear Lake.)