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Cleveland Clinic Partners with Akron General

 |  By John Commins  
   June 11, 2014

In an exclusive partnership deal, Akron General Health System will retain majority ownership and there will be no attempt to impose Cleveland Clinic's employed physician model on private practices affiliated with Akron General.

Cleveland Clinic will become a minority owner of Akron General Health System, making two health systems exclusive partners in the highly competitive Summit County Ohio market.

Thomas L. "Tim" Stover, MD, MBA, president/CEO, Akron General Health System, declined to detail the financial terms of the deal, which includes a "substantial" investment by the Clinic. Nor could he provide a specific breakdown of the Clinic's minority ownership.

"Frankly we don't know yet," Stover said in a telephone interview Tuesday. "We have to do an evaluation of our entire system and then we are going to back into the percentage. But it will be significantly less than 50%."

Stover says it was important for Akron General to retain majority ownership of the health system because "first of all we want to make sure that this thing works."

It was also a question of local control.

"Even though we are only 25 minutes away from Cleveland, Akron, OH is Akron, OH. People want to get their care here," Stover said.

"I have always looked at The Clinic as an asset and not a competitor. They take care of the sickest of the sick. It's great to have that resource this close. But on the other hand, for what most people want taken care of, we have it here at Akron General. It is a good way to start. Both of us have the idea that as time goes on there will be a bigger relationship coming down the road. But both of us are comfortable with this position at the beginning."

Ann Huston, chief strategy officer at Cleveland Clinic, says the deal is expected to be finalized within the next two months.

"We are driving hard over the next several weeks to get our definitive agreement architected," Huston said in a telephone interview Tuesday. "One of the things we did at the beginning our discussions was talk very specifically about what was important to each organization and what the objectives of this relationship would be. And one of those very clear objectives was to continue to have strong Akron-based leadership of Akron General Health System. That had a lot to do with how we crafted the arrangement."

Hospital sector analyst Allan Baumgarten said in an email exchange Tuesday that the deal makes sense for both health systems fighting for a leg up against strong competition in the hotly contested Akron market.

"In short you have Catholic Health Partners buying a share of the Summa Health, the other Akron system and Akron General needing capital and care management help," Baumgarten says. "Cleveland Clinic has wanted a presence in Summit County for a long time. University Hospital already is there and would probably do something with Akron General in the Clinic didn't get there first."

Although Akron General is a fairly large healthcare system, Stover says it had to be bigger in the Akron market.

"Northeast Ohio is heavily managed as far as managed care is concerned and we have a competitor in town (Summa Health) with their own insurance company," he says. "It's difficult for us to do population health without a partner that can have some influence on a payer."

"Not only that, but the market has completely changed. The majority of the competition that Cleveland Clinic looked at when they were talking about Cuyahoga County was University Hospital. University Hospital has made significant inroads to Summit County. They've bought 16 of our primary care physicians."

"Remember, about 65% of the Clinic's revenues come from eight surrounding counties and we are one of them. They can't afford to lose this market in Summit County, No. 1. And UH is here and they have to compete against them."

Huston says Cleveland Clinic already sees many patients from Akron, which is only 35 miles away. "When we think about our service area, Akron is just core to our service area," she says. "It is a very natural relationship for us to have, to formalize it and continue to grow services, programs, access in that market together."

Both health systems played up the opportunity for physicians in Akron to participate in Cleveland Clinic's Quality Alliance, which fosters collaboration between independent and employed physicians to improve quality of care, reduce costs and increase efficiency, and provide access to expertise, data and experience.

However, Stover says there will be no attempt to impose Cleveland Clinic's employed physician model on private practices affiliated with Akron General.

"Most of our compensation models are revenue minus expense, pretty similar to what we did in private practice," he says.

"The Clinic has learned that they can't push their physician model on an independent private practice facility or community. They are not demanding that our docs become a part of their model. They are very aware of the environment they are coming into. They don't want to change that culture. They want to enhance it. We are going to have multiple different models as far as physician alignment is concerned. It's not an issue for us."

In a separate announcement this week, Cleveland Clinic said it has formed a joint venture with Select Medical to provide inpatient rehabilitation services in Northeast Ohio.

Under the deal, the two organizations will expand these services on Cleveland's West Side by building a new 60-bed adult inpatient rehabilitation hospital in Avon, OH.

The two organizations have also entered into a management agreement, effective Aug. 1, 2014, to enhance operations in existing Cleveland Clinic rehabilitation facilities. The deal will create a residency program for physicians in physical medicine and rehabilitation.

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John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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