3 NC Health Systems Form Shared Services Organization

Wake Forest Baptist Medical Center, WakeMed Health & Hospitals, and Vidant Health have no geographic overlap and are not in competition with one another, but the deal should enable them to attain benefits of scale while retaining their independence.

Three of the largest health systems in North Carolina have created a shared services operating company.

Senior leaders at Vidant Health in Greenville, Wake Forest Baptist Medical Center in Winston-Salem, and WakeMed Health & Hospitals in Raleigh have announced jointly that the new organization, which has yet to be named, will allow the three systems to gain benefits of scale while enabling each system to maintain its independence.

"We have three very large successful organizations all committed to improving the health of their communities and all committed to remaining independent in service to their communities," said Donald Gintzig, president/CEO of WakeMed, who was reached for comment Friday.

"This model made the most sense for us trying to explore ways we can work together to improve quality within our healthcare systems and the communities and to help make healthcare more affordable."

"This gives us the ability to still focus on those aspects that are community focused while at the same time tying our efforts around that quality/affordability piece, and working on those things that make sense as we start to build it and evolve the organizational efforts going forward."

Gintzig said that the agreement was facilitated by the fact that the three health systems have no geographic overlap and are not in competition with one another.

The looser shared services model also means the deal will not be subject to rigorous anti-trust or stringent and lengthy regulatory review which is required for traditional mergers and acquisition. This "again makes it more effective in both the near- and the longer-term in pushing initiatives forward," Gintzig said.

"It in no way could be viewed as anticompetitive because our markets don't overlap, and that is one of the beauties of us partnering with these other two entities that are committed to remaining independent."

The model is designed in anticipation of healthcare reform, the decline in Medicare/Medicaid reimbursements, and the shift away from volume toward value. Gintzig says the model could adapt to support Accountable Care Organizations and population health initiatives through business and clinical efficiencies that include clinical protocols, supply chain, IT and infrastructure management.

"We are all three outstanding health systems and if we just move each other up to each other's best practice we will significantly improve quality in our region," he said. "As we improve the quality piece, we are able to drive value and it positions us well to be able to encourage and support the transition from predominantly healthcare to both a healthcare and a health world."

The company is formed as a separate limited liability company with a board made up of representatives from the three health systems. "There will be an operating committee and a governance committee along those lines," Gintzig says.

"It is going to start out small. Potentially it could grow, but it will have between five and 10 employees; some external who are brought in from the outside with the expertise to help lead this effort, and I am sure some internal."

Gintzig says the savings will come when the three systems leverage their market size and identify redundancies and efficiencies.

"Together we are well over $6 billion," he says. "Wake Forrest, Baptist, and Vidant are all affiliated with medical schools. We are a very large training site and a tertiary hospital that partners with University of North Carolina for educating and training physicians."

"We have the ability to partner together to bring some scale for group purchasing, the ability to come together to share services at some point for some back office requirements that may be needed both now and in the future. We all three are at various stages of implementing our electronic health record [systems] and we all use the same vendor for that, which is Epic."

For example, Gintzig says the three health systems could save considerable money by pooling resources on data storage and retrieval. "Instead of all three of us having to build redundant systems, maybe we build one and use it to support all three entities," he says.

Eventually, he believes, the model could be expanded to include other health systems, physicians' groups or lab companies.

"The options are significant to explore," he says. "Although, part of the reason that this was able to be agreed upon and analyzed in a short a period of time was through starting small enough. We were not trying to bring eight organizations, but three committed organizations all with a significant amount of expertise and scale in their areas."