Alliances: Pathways to an ACO
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DLP, which both entities refer to as Duke/LifePoint, does not have employees, per se. Instead, both Duke and LifePoint have representation on its board of governors, which will focus on strategic decision-making and long-range planning. That group makes major decisions for DLP, including decisions about capital allocation. That board works with local hospital boards on decision-making and planning. Each local hospital continues to have its own governance and board of trustees, but DLP will have representation on local hospital boards. Also in DLP’s structure is a quality oversight committee, which reports to the board of governors and is made up of clinical experts in both organizations.
“That’s where Duke will have significant input and influence,” says Fulkerson.
LifePoint Hospitals Chairman and CEO Bill Carpenter says the partnership with Duke makes sense because community hospitals have a dire need for the clinical expertise of a highly respected academic medical center like Duke, but also have a similar need for expertise on navigating the quickly changing world of healthcare reimbursement and regulatory compliance that may otherwise be too much to handle and may require bigger capital investments than they can swallow on their own.
“Hospitals in smaller communities are considering their alternatives because the world is changing so fast,” he says. “Recruiting, capital improvements, technology, meaningful use, compliance, and reduced reimbursement are all things that smaller community hospitals are trying to deal with, and they need the long-term security that a well-funded partner can bring to them.”
Both Duke and LifePoint plan to take the first year or so slowly, although they are open to many different deal structures. They launched the LLC with a joint venture between DLP and 102-licensed-bed Maria Parham Medical Center in Henderson, NC. The deal means DLP takes an 80% ownership stake in the hospital, proceeds from which will be used to fund a community foundation in Henderson and retire all MPMC debt, while allowing MPMC to retain 50% representation on the 10-member board of the hospital. In return, $30 million will go to the foundation, and DLP agrees to make $45 million in capital improvements to the hospital over the next 10 years.
That model isn’t new. It’s been used successfully by Triad Hospitals, but growth of the model was stunted when Triad was acquired by Nashville’s Community Health Systems in 2007. Though it was a main pillar for Triad, CHS gradually divested itself of such deals and didn’t do new ones. Triad’s management team subsequently launched LHP Hospital Group LLC, which has continued the model on a smaller scale.
DLP also plans to do outright acquisitions, and did so in August with the acquisition of 110-licensed-bed Person Memorial Hospital in Roxboro, NC, which had been managed by Duke alone for the past 13 years. It also acquired MedCath Partners LLC’s nine North Carolina heart labs for $25 million.
Fulkerson notes some reticence on the part of those at the recently acquired organizations regarding the nature of the Duke and LifePoint partnership.
“Six months ago, we were brand-new and the local folks at the two hospitals were uncertain of where this was going,” he says. “My response to Maria Parham was, if you’re the first, we’re going to be damn sure this is a success. We have been talking about this for two years and we have a good idea of what our capabilities are.”
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