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January 23, 2012

Catholic Healthcare West Drops Church Affiliation

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In a move I wouldn’t be surprised to see imitated, big religious hospital chain Catholic Healthcare West has broken its official ties with the Roman Catholic Church, though it will continue to include both Catholic and non-Catholic facilities in its flock.   The chain, which is changing its name to Dignity Health, currently includes 15 non-Catholic hospitals and 25 Catholic hospitals.

The system’s leaders have concluded that they couldn’t meet their ambitious growth targets if forced to adhere to faith-based care guidelines in all of its facilities.

According to CEO and president Lloyd Dean, who spoke to USA Today, he’s had to step away from potential deals several times when partners questioned their role in a Catholic system. This way, it should be much easier for CHW to work with other systems and acquire medical practices, observers say.

I expect to see other faith-based chains consider similar moves over the next year or two. As we’ve noted in this forum before, having to adhere to religiously-based rules can be a bit of a hassle for secular organizations, especially those that hope to compete in tight markets.  Mergers between the two sides can become a Tylenol headache very quickly.

Consider the struggles the University of Louisville (KY) went through in an effort to merge with Catholic-owned St. Mary’s Healthcare, forcing it propose build a “hospital in a hospital” to provide forbidden services. It makes my eyes water just to think about it. With health reform afoot, mergers a fact of life and new partnership models emerging every day, CHW may have done the only thing it could do.

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January 16, 2012

A Snapshot: Is Free Care in Minnesota What It Appears?

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With any luck, we’ve finally left the worst of the financial crash behind, and with it the financial challenge posed by large numbers of medically indigent patients.  A recent report from Minnesota’s hospital trade group underscores how bad things were for patients. It also suggests that the hospitals may not quite be as charitable as they claim.

According to the report, the level of free or discounted care provided by the state’s hospitals shot up 27 percent in 2010, driven largely by falling state coverage and rising unemployment.  The Minnesota Hospital Association said that state hospitals provided $226 million in charity care last year, along with $498.5 million expenses generated by Medicaid patients receiving discounted care that wasn’t reimbursed.

OK, let’s break this down. We’ve got, very broadly, $750 million in direct charity care expenses among 135 hospitals.  While I don’t know exactly what they grossed in 2010, we can be pretty sure it exceeds that figure by at least three or four orders of magnitude.

Sure, several million in charity care per hospital is enough to erode the slim margin most hospitals cope with year to year.  On the other hand, we know it’s not a simple matter of money in, expenses paid for charity care.  The accounting gets more complicated than seven-way chess, and let’s admit it, some of the numbers are a bit dicey at best.

Now, I’m not suggesting any individual hospital is gaming the system worse than others. But I am suggesting that if this is the best they can come up with, they’d better get cracking. Neither the IRS or Congress has much patience for charity care numbers that don’t add up, and municipalities (at least in Illinois) are getting into the “yank the tax exemption” act too.

Bottom line, you better keep your nose clean and those charity care numbers better be above board. If you’re not already, it’s time to avoid accounting tricks and play it straight.

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January 2, 2012

ACO Proves Major Political Turning Point For Boston Hospital Chain

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Transforming a hospital system into a fully-functioning ACO is a huge project, and one which requires a big commitment.  It’s hardly surprising that going through the process would change how its leaders think about their business.  But the following is the first case I’ve heard of in which a hospital system made a major break with its peers over its ACO status.

Apparently,  for-profit Steward Health Care System has just resigned from the Massachusetts Hospital Association, bringing its 10 hospitals (and 11 percent of the MHA’s revenues) with it.  Steward, which was created by the acquisition of six-hospital Caritas Christi Health Care Chain a year ago by VCs, has since picked up four hospitals and done a host of doctor deals.

Not surprisingly, Steward seems to have bruised some competitors’ feelings along the path to ACO-hood, which probably has something to do with its MHA departure, but Steward isn’t copping to that of course.

At this point in its evolution, Steward’s leaders say, the MHA’s positions on politics don’t represent its needs anymore. Particularly when it comes to health reform, Steward’s leaders feel it now has a different take than other members of the MHA, which has to advocate for shared positions across almost 100 hospitals with varied approaches.

As for me, I’m not sure what those differences are; in fact, I’d think that a “real” ACO would be an inspiration for, and partner to, other hospitals on the path to health reform.  In fact, this raises some questions as to how the growing ACO trend will affect hospital relationships this year:

* Are IDNs that work hard at building a true ACO going to upset their peers so much that it will create a drag on their business overall?

* Most healthcare business models have some detractors and some fans, but is this one of the few that can actually divide the industry?

*  Are ACOs a direction every IDN can take, or are there resource constraints (such as the size of a local market or number of unaffiliated doctors) that will prevent some from building one? Will the coming rush create ACO “haves” and “have nots”?

What do you think, folks?  Have you seen anything happening in your markets that might answer these questions?

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