Six months into a five-year contract, leaders of CHI St. Vincent and the Conway Regional Health System say their unusual partnership is a way for both a large system and an independent hospital to respond to the changing health care environment – and one that may soon lead to more partners.
The two entities announced last August they were entering into a contractual management agreement where Conway Regional maintains its independence under its own board of directors while being led by four St. Vincent executives who serve as chief executive officer, chief operating officer, chief financial officer, and chief nursing officer. All other employees remain Conway Regional employees who report to them. Either side can end the agreement once the five-year contract is complete.
The process began in about 2010-11, said Barbara Williams, Conway Regional’s board chair. The board knew the health care industry was facing increasing consolidation and mergers. Independent hospitals like Conway Regional were decreasing in numbers. Meanwhile, the health finance environment was changing from the old “fee for service” model, where hospitals treat and then bill, to models requiring more cost-effective care. Those models require data and expertise.
“You’re looking at it and you’re saying, ‘It’s really challenging today,’” said Jim Lambert, who was Conway Regional’s CEO at the time. “‘It’s getting more challenging in the future. They’re changing the dynamics of how we’re going to get paid, and I’m not sure, do we have the expertise internally to manage in that new environment?’”
The hospital was financially strong, which meant this was the best time to explore options. The board wanted the hospital to remain independent, but it knew it needed a partnership. It considered many options, including national systems such as the Mayo Clinic and the Cleveland Clinic, as well as local ones such as Baptist Health. When Baptist Health announced it was building a new hospital in Conway on Interstate 40, the hospital felt newfound urgency.
“It changed the focus and said this is real,” she said. “We’re going to have a major hospital player in the community. But yet we also continued to know we are the primary hospital. We’re Faulkner County’s hospital.”
Williams said the management arrangement gave Conway Regional access to CHI St. Vincent’s resources, depth of knowledge, and intellectual capital. Conway Regional remains a local hospital but is part of a $16 billion company. The move has required Conway Regional to answer a lot of questions from staff members, who were already in a questioning mood with the new hospital coming to town. Community members wondered if Conway Regional now is a Catholic hospital. Short answer: It’s not.
Conway Regional’s new president and CEO, Matthew Troup, previously was CHI St. Vincent’s vice president of ancillary and support services. Still a CHI St. Vincent employee, he refers to St. Vincent as “they” and to Conway Regional as “we.”
“I think of myself as a Conway Regional executive and a Conway Regional leader,” he said. “I have to look at my pay stub every once in a while to remind myself where it is I work.”
The day-to-day relationship between the two entities is still evolving. Conway Regional’s leaders say the hospital still offers its own local services and won’t simply be a feeder into the larger network. They and CHI St. Vincent’s CEO, Chad Addudel, foresee relationships between the entities developing naturally and voluntarily as the providers work together.
“That was one of the very important parts the board looked at,” Williams said. “We weren’t willing to be just someone that ships them on to the mother ship.”
From CHI St. Vincent’s perspective, the hospital wanted to create a partnership that would be scalable and would allow the system to partner with other independent community hospitals, said Addudel.
The result was the Arkansas Health Alliance, a partnership organization that involves those two entities but eventually will involve more. Lambert, Conway Regional’s former CEO, became head of that Alliance. Addudel said the Arkansas Health Alliance is built around three principles: filling provider gaps, using scale to negotiate better pricing, and clinical integration, which he said is “about managing the health of a population in a more cost-effective manner through the clinics, through outpatient services, through post-acute services, rather than just thinking about things through our current fee for service model, which is, you’re paid to do more.”
Lambert said he is spending about half of his time building the Alliance’s structure and processes and looking for cost-saving opportunities, and spending the other half talking to other providers. Lambert said he has spoken with “not quite a dozen, probably.”
“We’re looking for the independent facilities,” he said. “Right now, we’re sort of targeting the hospitals that are comparable to Conway – independent hospitals that want to maintain their independence but are looking for maybe solutions that they can’t develop on their own or cost-saving opportunities they can develop together.”
So far, no one has bitten. Lambert said the providers with whom he has spoken have not faced urgent situations like Conway Regional did and are taking more time to evaluate their options. He did not have an estimate for how many would join, though he believes “we’re getting close to pulling some people in.” He believes more providers will join as it becomes clear they will not have the scale and expertise to manage risk, manage health populations, and control costs.
“In Conway, 150 beds, we didn’t feel like we could do it, so you think of every hospital in the state that’s smaller than Conway Regional, and there’s a ton of those, how are they going to do that?”
Lambert said the Alliance will not be buying and selling facilities, but interesting things could happen within the Alliance, including members merging with other members. So far the Alliance has communicated with independent hospitals, but larger systems someday could be involved. However, Conway’s management agreement may be unique and based on its own situation.
Addudel said the nation’s health care system must change because costs are rising unsustainably. As a result, payment models increasingly are based on value instead of volume. Rising payment models include patient-centered medical homes, where a primary care physician leads the multidisciplinary team serving the patient, and episodes of care, where a principal accountable provider faces rewards and penalties based on cost-effectiveness of care. Adding to the challenge is the fact that the payment model system is still in a transitional period.
“We often talk about having a foot in two canoes. … You have to prepare for that future model, so we’re building the infrastructure to be ready for that move from volume to value,” Addudel said. “You can’t just live in fee for service and then one day flip the switch and hope to make the jump. We are building the knowledge, building the expertise, building the experience, building the infrastructure to be able to be successful in that value world while still having a foot in the canoe of fee for service.”