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Resisting the Consolidation Frenzy

Philip Betbeze, for HealthLeaders Media, December 13, 2013
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Mansfield and his board have agreed on certain "advance indicators" that they monitor to provide a level of early warning that the system might be better off with a merger partner. He monitors metrics on a constant basis around margin levels, budget adherence, medical staff growth, and alignment of medical staff and quality, to name a few of the 13 related directly to maintaining an independent track. He and his staff rate each green, yellow, or red, though he says there's no set formula on how many would have to be yellow or red in order for the system to change its dialogue.

"If we're going to be consolidated, we'd rather do it earlier than late," he says. "We're not shy about having that conversation."

Mansfield has been part of three systems during his career; Methodist is the smallest, but he says its cost structure is better than the two big systems of which he was a part.

When Methodist made a decision to grow from two to seven hospitals, "we made an effort to look at fixed and variable cost per adjusted discharge," he says. "If we didn't reduce both of those, then the acquisition was not a success."

Mansfield, who says he still comes in every day to fight the growth of corporate overhead, says Methodist's management team forced itself to fight that fight.

"It was work, because people want to add more full-time employees, and you have to manage that case by case to keep from letting corporate overhead costs get out of control."

He stresses that capital is a worry, but finding it in a big system is no easier than in a small one.

Going the legislative route

Arthur Gianelli, president and CEO of NuHealth, a safety-net health system in East Meadow, N.Y., with 2012 net patient service revenue of $565 million, is focused on staying independent but has buttressed his options through collaborative partnerships with the dominant health system in his area, North Shore-LIJ Health System, which has an annual revenue of around $6.3 billion.

He says the collaborative deal with North Shore has helped it make Investments in clinical decision-making that may not yield revenue today but will when contracts are risk-based.

"We are at the initial stages of that curve in terms of our contracts and infrastructure."

He says the imperatives in his market, like others, are toward consolidation, but that his board has a strong desire to remain autonomous to provide for its public mission.

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