Stratus Healthcare Alliance Strategy Detailed

Georgia's new 23-hospital collaborative, with its focus on operational initiatives and improving population health, "represents a formidable force with substantial bargaining power" and may be the first stage of something bigger, says one healthcare analyst.

Twenty-three hospitals and health systems and about 1,500 physicians in central and south Georgia on Tuesday announced the formation of a clinically integrated non-equity partnership called Stratus Healthcare.

Ninfa Saunders, CEO/president of Macon-based Central Georgia Health System, which along with Tift Regional Health System in Tifton were among the original advocates for Stratus Healthcare, says the initial focus of the collaborative will be to improve population health using best practices, networking, shared services, and coordinating primary and specialty care needs for the region.

"The one thing that is different about this part of Georgia is that every hospital wanted to remain independent," Saunders said in an interview. "So mergers and acquisitions, unlike a lot of areas, were not in the recipe for this area. What was desired was more independence and a focus on local healthcare by local physicians and to develop a collaborative or a strategic partnership that allows us to do as many things as possible in an aligned way to meet the health needs of the population."

Healthcare economist Adam Powell believes Stratus Healthcare has been created as the precursor to something else.

"Although it has been formed as an alliance, the press release announcing its creation mentions that it intends to eventually transform into an LLC. I see this as a merger in the making that may have been announced early for strategic reasons. Given the number of organizations involved, it may have been easiest to accomplish this in stages," Powell wrote in an email exchange with HealthLeaders Media.

"Furthermore, Tift Regional Health System is currently actively seeking a new COO through the executive search firm Witt/Kieffer. Given the operational changes associated with this alliance, the announcement may have been made rapidly so that progress would be underway before the installation of a new COO. Tift is operating from a position of strength, as it held $336 million in net assets at the end of 2012, $42 million of which had been accumulated during the year. Participating offers it the opportunity to continue its success," Powell wrote.

Saunders says she expects that Stratus will evolve to include more operational initiatives, and grow to include more hospitals in the coming years.

"What I see in terms of strengthening the partnership is a slight movement from non-equity partnership to some shared equity, but not quite mergers and acquisitions," she says. "We may find some projects we want to invest in together. Now we are pooling resources specific to hospitals to meet the particular needs of that particular area or population. That is where I begin to see this sharing, which is joint projects, joint investments, joint collaboratives, with equity associated with it. As we are able to formulate systems of care that not only connect hospitals but also the post-acute and retail side, the outpatient ambulatory side, then it begins to define itself differently and it will be open to many other arrangements."

While plans are underway to form a group purchasing agreement, Saunders says there are no immediate plans to use the clout of the partnership to barter for better rates with health insurance providers.

"The focus right now is on four objectives: How do we get physicians and hospitals together so that our patients will have the right access to the right care at the right time at the right cost?" she says. "We said to ourselves 'let's go back to basics. How do we improve the quality of care with this population first? How do we put the processes in place so that we are evidence-based and we can measure processes in the same way and focus on outcomes, raise the bar in terms of our outcomes and then anything can come after that."

Saunders says another target is the development of a primary and specialty care networks for the region.

"We are spread out so we are concerned about recruiting to the region, given the shortage. We are looking at specialty care networks and what specialties are needed," she says. "The medical center that I run is a teaching hospital, the second-largest in Georgia. So one of the things was what specialists might we make available for our partner hospitals. Or if there is a need to hire in a particular hospital how could we join like-minded people that have the same needs so that not everybody is investing and capitalizing 100% of that expense," she says.

The partnership also plans to examine shared services. "How can we begin to look at the redesign of care together? How do we reduce the cost through group purchasing, maybe looking at running programs under one umbrella as opposed to everyone having one," Saunders says.

The partnership will also consider forming a regional emergency medicine consortium.

"That allows all of the emergency room physicians to identify how we can [provide] care without having to repeat things over and over again," Saunders says. "When a patient is transferred to another hospital we tend to repeat the diagnostics. Why do that if our processes of care and our algorithms of care have been agreed upon by all of the players. The same thing with hospitalist medicine, which is one thing we are interested in growing in a regional way so that not every hospital is attempting to manage this on their own."

Powell, president of Boston-based consultants Payer+Provider Syndicate, says this week's announcement builds upon several other recent partnerships in Georgia. "In April 2012, Central Georgia Health System developed a partnership with Tift Regional Medical Center to coordinate information systems, clinical services, and business services. Central Georgia Health System also recently partnered with Peach Regional Medical Center to build The Medical Center of Peach County, a new facility that will expand access to care in the community," he points out.

Powell says that by sharing information Stratus Healthcare hospitals will be able to manage risk and expenditures as they migrate to value-based payment.

"Under (accountable care organization) contracts, health systems are liable for the cost of care a patient incurs, even if the patient goes outside of the ACO to receive care. Poor information sharing can lead to duplicative testing," Powell says. "By pooling information, the health systems can avoid performing duplicative testing and can better coordinate care for patients seeking care at multiple institutions within the region."

"Stratus goes a step further," Powell explains, "by enabling its members to engage in collective purchasing and the sharing of business resources. Given the substantial proportion of Georgia hospitals in the alliance, it represents a formidable force with substantial bargaining power."

"Across the country, we have seen a wave of provider consolidation and integration. While Stratus is notable for the relatively large number of organizations it contains and its relatively loose nature, it is part of a greater trend of cooperation," Powell says. "While state governments have been forming regional health information networks, this alliance goes a step further, as it moves the organizations towards operational integration.

Stratus Healthcare member hospitals and their medical staffs include:

• Bleckley Memorial Hospital (Cochran)
• Central Georgia Health System, which includes: Medical Center of Central Georgia (Macon); Central Georgia Rehabilitation Hospital (Macon); and Medical Center of Peach County (Byron)
• Coffee Regional Medical Center (Douglas)
• Columbus Regional Health System, which includes: Columbus Regional Medical Center (Columbus); Doctors Hospital (Columbus); and Hughston Hospital (Columbus)
• Crisp Regional Hospital (Cordele)
• Dodge County Hospital (Eastman)
• Houston Healthcare, which includes: Houston Medical Center (Warner Robins); and Perry Hospital (Perry)
• Jasper Memorial Hospital (Monticello)
• Oconee Regional Medical Center (Milledgeville)
• Putnam General Hospital (Eatonton)
• South Georgia Medical Center Health System, which includes: South Georgia Medical Center (Valdosta); Smith Northview Hospital (Valdosta); and Louis Smith Memorial Hospital (Lakeland); Clinch Memorial Hospital (Homerville); SGMC Berrien Campus (Nashville)
• Taylor Regional Hospital (Hawkinsville)
• Tift Regional Health System, which includes: Tift Regional Medical Center (Tifton); and Cook Medical Center (Adel).