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Consolidation Comes with Benefits (and Costs)

Philip Betbeze, for HealthLeaders Media, October 16, 2013

Many local hospitals—typically dominated by community-based directors and focused on provincial interests—often lack the capability to expand their offerings much beyond the inpatient care space. Over time, that could lead them to seek affiliations or acquisitions with systems that can build out that outpatient capability, among other business imperatives like investment in IT and care pathways.

But just because some hospitals and small health systems are realizing they don't have the firepower to make that transition, getting to that point is often frustratingly slow, Cosgrove admits. That sluggish pace presents an obstacle to Cleveland Clinic becoming one of the Big 12 that Cosgrove envisions will eventually dominate healthcare.

"A lot of communities and boards have difficulty giving up that control and responsibility for their community hospital. That has been a real process. Every time we've done it it's taken as much as two years to get from the point of them insisting on being independent," Cosgrove says.

At the same time, the process is getting easier, he says.

"It has accelerated because people are feeling the financial pressure, and as reimbursement goes down, they'll feel that increasingly."

He contends that inpatient bed count has to go down one way or another.

"There are 200,000 fewer beds than there were because of shorter hospitals stays and because more is being done in an outpatient setting," he says. "As hospitals have empty beds and decreased reimbursement, they're incented to be part of a system."

Cleveland Clinic has put together an impressive array of care sites that Cosgrove says "is built on the principle of doing the right thing for the right person in the right location."

It's got partnerships not only with Franklin, Tenn.–based Community Health Systems but also with national drugstore chain and pharmacy benefit manager CVS/Caremark, and has developed its own family health centers for chronic care. Cleveland Clinic's community hospitals perform common procedures such as deliveries, orthopedics, and general surgery but increasingly don't do complex procedures such as heart care or neurosurgery. Those cases are fed to the clinic's main campus.

"We've connected all of that to our EMR and transportation system," he says. "So we move people around and their records follow them."

This process will become more ingrained over time as Cleveland Clinic becomes increasingly integrated and more of a system.

"Our model of care is something that's appropriate for the 21st century—particularly because we're an employed-physician group, so we don't have incentives to do more operations and tests," Cosgrove says.

Acquiring struggling hospitals does not have to be part of the equation for whether a hospital or health system ultimately is able to remain independent, says WakeMed's Atkinson. Consolidation will continue, he says, and that's neither good nor bad, "but a rural hospital with a tough population base to cover is the same thing the next morning after you buy it."

Perhaps that money earmarked for growth through acquisition would be better spent improving ways to manage patient health, which is part of what Cleveland Clinic and others are doing, although they are also acquiring formerly independent hospitals.

"We're doing that pretty assertively," says Atkinson. "We were the first in the area to create freestanding EDs."

WakeMed has four of those, with a fifth planned, and Atkinson says they can treat everything except level I trauma or imminent birth, and claims that about 90% of what's presented in those EDs can be handled without a bed.

"What I'm saying is you can get out on a limb and find new ways to get care closer to people and probably improve the clinical outcome and significantly reduce cost. Those EDs allowed us to stop building as many beds as we had been. Our biggest campuses are ambulatory and don't have inpatient beds and may never have them."

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