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For Small Health Systems, Big Decisions Can Mean Life or Death

Philip Betbeze, for HealthLeaders Media, February 17, 2014

"Unfortunately, we can hang our hat on being low cost. We haven't had the luxury of what the large players get in commercial contracting. There are models now that will hopefully let us leverage that through exchanges or even private exchanges such as the one we have with Medica [a health plan operator based in Minnesota]," he says. "We're the low-cost option. With our community-based ACO model, in order to have a larger economic footprint, we finally can leverage that position."

Other areas Phelps labels as high-risk include deals with physicians and decisions on whether to own or partner with existing physician practices.

"The higher-risk areas typically surround things like owning physician groups, which we haven't been shy to do in particular areas, but we have in others," he says.

Outside of primary care, he feels Ridgeview has done better in partnership with best-of-breed independent physician practices. Ridgeview has joint venture partnerships, which have done well by employing such groups as gastroenterology practice and an oncology group. Cardiology was another area where he says a system like Ridgeview would undergo a lot of unnecessary risk to start its own.

"What if you have bad outcomes?" he asks, for example. "All of a sudden no one's coming to your multimillion-dollar cath lab. So we partnered with one of the best groups in the market, and we're doing that through a partnership instead of organically."

Thanks to these growth and efficiency moves, Phelps see a bright and, critically, independent future.

"We're in a desirable mix of urban and rural markets that are part of the referral sources for the big ones," he says. "Everyone wants a piece of you, and it puts you in a good negotiating position. Our independence is the thing that got us here."

Reprint HLR0214-7


This article appears in the January/February issue of HealthLeaders magazine.


Philip Betbeze is senior leadership editor with HealthLeaders Media.
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1 comments on "For Small Health Systems, Big Decisions Can Mean Life or Death"


Robert C. Bowman, M.D. (2/18/2014 at 9:45 AM)
Since 1986 I have considered rural hospitals and practices and physicians to be endangered species. The current changes to their environment takes away their food and water, making them more endangered than ever. Unfortunately this endangers the tens of millions that they serve. This is close, but still does not quite get it right. Efficiencies can be demonstrated in those bigger and unorganized because they are bigger. Smaller is already efficient and has had to be to survive. Rural and smaller hospitals and practices do not need a niche. Niches are more expensive and are a poor fit with areas that need basic services and primary care and ER. Rural practices and hospitals are basic services, primary care, and ER if they can maintain a hospital against the barrage of forced increased investments and threats to revenue streams. 68% of Americans live in 40,000 zip codes in most need of the basics. Niche and competition is about 1100 zip codes with 10% of the population, and 45% of workforce.