Jefferson Health Merger Model Stresses Community-based Care

The Philadelphia-based academic medical center is building a 'hub-and-hub' health system that provides care in lower-cost community hospitals and pushes value over volume.

Traditional hospital mergers and acquisitions create a hub-and-spoke model. The hub hospital, usually a large urban acute care or academic medical center, picks up surrounding community hospitals, often financially stressed, to build a regional referral network and—often left unsaid— to create a larger footprint to improve leverage with payers. 

Stephen Klasko, MD, president and CEO of Jefferson Health, says the Philadelphia-based health system is turning that model upside down and creating a delivery system that aims to treat patients in the communities where they live.

By acquiring financially sound community hospitals and providing care in those less-expensive settings, Klasko says the Jefferson Health model can avoid the increases in the cost of care that usually occurs when hospitals consolidate.

"It is asinine to believe that, if you are an academic medical center that's trying to bring in troubled community hospitals so they can send more patients to your expensive hospital downtown, prices will go down," he says. "Our model is 180 degrees from that."

Last week, Jefferson Health finalized its acquisition of the three-hospital Aria Health system, coming a little more than one year after the acquisition of Abington Health.

The combined system includes eight hospitals, 32 outpatient and urgent care facilities, and dozens of physician practices, and about 23,000 employees, all of which is governed by a board trustees that has an equal number of representatives from the academic medical center and the various community hospitals.

"The control is literally across the entire enterprise," Klasko says. "The vision of the board is to look for what is best for the community rather than what is best for downtown."

Jefferson is also in the process of acquiring Kennedy Health, a three-hospital system serving southern New Jersey.

"One thing that is different about our model is that all of our mergers have been shared governance, hub-and-hub mergers with other systems that didn't need to do anything," Klasko says.

"We don't even respond to someone who says we need $200 million to survive."

Keeping Patients in Their Communities

Former Aria CEO Kathleen Kinslow says the health system went into the merger with a "goal to keep patients in their communities."

"When we were going through the process, two things that we had in the forefront were to be able to maintain our mission and to serve patients where they live. Bringing the expertise of an academic medical center into the community allows that to happen," says Kinslow, now the executive vice president and chief integration officer at Jefferson.

"Through the integration process, one of the things as we bring the service lines together is to look at total cost of care. At Abingdon and Aria, based on where we are geographically, the cost of care is lower. Instead of transferring patients to the city hospital, it's keeping them in the community and developing those protocols and systems that need to surround care pre- and post-operatively, and what you need to do in the community will all be continued to be developed."

"The metric we will continue to look at is total cost of care and quality outcomes," Kinslow says. "You can have low cost of care but poor outcomes that wouldn't be advantageous. All organizations have a strong commitment to quality and safety."

Klasko says Jefferson has demonstrated a history of success in population health and cost containment with its participation in the Delaware Valley Accountable Care Organization, a Medicare shared savings program.

"We were one of the top five or six receivers of dollars for quality/cost ratio in the last go around with (Centers for Medicare & Medicaid Services)," he says. "The fact is we are investing lots of dollars investing all the things you ought to do in going from volume to value while frankly some others are doubling down on the old way, and that is why costs haven't gone down."

As for consolidation restricting competition, Klasko says that doesn't apply to Jefferson.

"The beautiful thing about Philadelphia is we have six academic medical centers within walking distance of each other," he says. "We'd have to get a hell of a lot bigger to worry about that."