Collaboration, Not Competition: Dartmouth-Hitchcock Building Hospital Network

Published: 8/12/2016 2:20:25 PM
Modified: 3/16/2014 12:00:00 AM
New London — Last October, there was a wedding in New London. The bride kept her name.

New London Hospital had courted Dartmouth-Hitchcock for several years, and after a lot of legal back-and-forth, discussions with state officials and members of the community, the two hospital systems made their union official on Oct. 1.

Since their “affiliation” went into effect five months ago, New London Hospital and Dartmouth-Hitchcock have been figuring out how to combine their checkbooks and get the relatives — the physicians, nurses and staff — to think of themselves as one big happy family.

“I think a lot of it is silo mentality,” said Jim Murphy, New London’s chief medical officer, one recent Tuesday morning. “So, when we share a checkbook with Dartmouth, you can’t think about it as Dartmouth-Hitchcock checkbook or New London checkbook. You have to think about the system and the region. That takes a while.”

However the marriage evolves, it will be carefully watched by other health care providers around the Twin States that are wrestling with how to squeeze costs out of hospitals and make a more efficient system.

Three smaller hospitals — Alice Peck Day in Lebanon, Mt. Ascutney in Windsor and Cheshire Medical Center in Keene, N.H. — are pursuing formal affiliations with Dartmouth-Hitchcock similar to New London’s, and hospital leaders elsewhere have expressed interest in the idea. If they go forward, the affiliations would create a regional health care network in which hospitals, while remaining legally independent, collaborate on everything from clinical care to accounting, share legal expertise and staff, and even reimburse each other for taking expensive patients.

It is just one avenue Dartmouth-Hitchcock is taking toward its larger vision for 21st century health care, one in which hospitals collaborate rather than compete for patients, and in which they are rewarded for keeping people healthy rather than paid to treat them only when they are sick.

Hospital officials say the affiliations will lower costs, improve care for patients and help vulnerable community hospitals survive during a time of radical change. The affiliations also give Dartmouth-Hitchcock greater control over the region’s health system while expanding the pool of patients.

That may be good for patients. Or not. As small hospitals cede power to a single large institution, the quality and cost consequences for patients will depend on the benevolence of the network’s overlord.

“A lot depends on the mindset and ethics of the people running the shop,” said Dr. Vikas Saini, president of the Lown Institute, a Massachusetts-based think tank focusing on health care issues.

Collaboration among hospitals doesn’t always lead to better results for patients. Hospital mergers elsewhere have typically led to higher prices with no improvements in care.

Speaking to Dartmouth-Hitchcock officials in 2012, Federal Trade Commissioner Julie Brill, a Randolph resident, said federal regulars were keeping a close eye on collaboration among hospitals. Less competition often results in consumers’ getting gouged, she said.

“When you have competitors who come together and say, ‘let’s coordinate care,’ the concern becomes that more gets coordinated than just care,” she said.

State regulators are watching too.

New London and Dartmouth-Hitchcock aren’t traditional competitors because their relative size and scope of care puts them in different markets, said David Rienzo, assistant New Hampshire attorney general in the consumer bureau. But if a bunch of small hospitals jump on board, particularly if they offered competing services to Dartmouth-Hitchcock, it could be a different situation.

“It may be a different analysis in the event that you have a number of small community hospitals suddenly becoming affiliated with one other entity,” said Rienzo, a Grafton resident. “Especially if they’re giving up a level of autonomy to that one other entity.”

Indeed, New London has given up some of its autonomy. Dartmouth-Hitchcock holds a third of the seats on New London’s board and has “reserve powers” over governance decisions, giving it the final say on the budget and strategic planning.

Many believe that the days of small, stand-alone hospitals are numbered. And affiliations like this may be the best option if community hospitals are to survive.

“I think the affiliation strengthens the ability to maintain a community hospital,” said Bruce King, CEO of New London. “Because if we didn’t have it, I’m not sure you’d have a community hospital. We’re all getting stressed.”

New London:
The First Affiliation

Dartmouth-Hitchcock has been extending its reach into community hospitals for years, through staff sharing agreements and contracts for services.

Among these arrangements is the “management service agreement.” Essentially, Dartmouth-Hitchcock hires the CEO for a community hospital, which then leases the CEO back. Officials say that helps recruit better applicants and strengthens the relationship between the region’s largest tertiary care center and the community hospital.

Mt. Ascutney Hospital in Windsor and Valley Regional Hospital in Claremont both have management service agreements in which their CEO technically is a Dartmouth-Hitchcock employee. New London was the first to go down that path.

King has Dartmouth-Hitchcock roots. He started there in 1987 and, even after becoming New London’s CEO in 2003, he remained a Dartmouth-Hitchcock employee. When officials talk about the “long-standing ties” between the two organizations, he is cited among them.

And he’s not the only person in New London’s leadership who came from Lebanon. Murphy, the chief medical officer, was at Dartmouth-Hitchcock for 30 years before he joined New London in 2011. Chief Nursing Officer Sally Patton spent 38 years there before she took early retirement in 2011 and then got hired on at New London, first in a temporary role and then permanently last year. There are others, as well, both on the administrative and clinical side.

In some ways, it made sense that New London would be the first hospital to hitch itself to Dartmouth-Hitchcock’s wagon, officials said.

“The advantage of that is there are relationships established already,” Patton said. “So that, I think, has been helpful as we talk about specific patient-related issues. There’s a much easier way to bridge the distance and make a difference in terms of how we’re caring for patients.”

Collaboration among health care providers is part of Dartmouth-Hitchcock’s vision for health care, one in which hospitals receive a lump sum of money to treat a population of patients. In this model, hospitals are taking a risky bet that they can keep expenses within the amount of money they’ve been given.

Proponents of this approach say it will do more to control costs than the current system. The aim is to eliminate a “fee-for-service” world in which doctors have the perverse incentive to order unnecessary tests and treatments, because that’s how they are paid.

Right now, health care is transitioning between the two, said Saini, of the Lown Institute. And that’s where affiliations raise concerns.

“If you fast forward to that world, the relationships, the affiliations may be perfectly benign for the public,” Saini said. “But right now, we’re in this transition and everybody’s nervous. And some of the money is volume-based and some of the money is risk-based. And in that scenario, it’s really hard to create a … wall between one set of activities and another.”

New London and Dartmouth-Hitchcock are still designing the walls and bridges that will structure their affiliated relationship. Fifteen teams comprised of staff from both hospitals have been looking at where they can combine efforts and cut costs without harming, and, with hope, improving, patient care. Marketing, finance, human resources, technology, third-party contracting and clinical activities are among the areas of focus.

So far, the discussions have been mostly academic.

“None of these things happen with the turn of a switch, like you have to flip it on,” Murphy said. “It would be nice to think that you could do that, but it doesn’t happen like that.”

There already have been instances when the partnership has come into play. One has been in where patients recover.

Dartmouth-Hitchcock is often near full capacity on its inpatient beds and has to send patients elsewhere because there is no room. Not all of those people need to be at a facility like Dartmouth-Hitchcock Medical Center if all they need is someone to change their wound dressings or give them antibiotics. But they can’t go home, either. Since the affiliation, DHMC has been able to send some of those patients to New London and free up beds for more critical patients.

“It helps D-H a lot,” said Steve LeBlanc, Dartmouth-Hitchcock’s executive vice president for strategy and network relationships. “Having to turn those patients away or delay the transfer of those patients at DHMC is a problem for us. So the more that we can free up beds, the better.”

Before the affiliation discussions began, New London was able to fill about half of its 25 inpatient beds, officials said. Post-affiliation, the daily census is around 20, sometimes higher.

The affiliation will allow for a smoother transition of those patients as the institutions become more integrated. But it also protects New London financially, LeBlanc said.

There is the potential for abuse in these partnerships. Larger hospitals might be tempted to cherry-pick patients, keeping those with the best insurance and dumping onto the community institution patients who can’t afford to pay. The affiliation allows Dartmouth-Hitchcock to reimburse New London for taking on some of those patients.

“There are rules around that and with two independent hospitals, that would be very, very difficult to do legally,” LeBlanc said. “But when, from the outside, you’re considered one entity, then it’s OK. You can actually share the economics.”

It also could allow New London access to more specialists.

Small hospitals don’t usually have the volume of patients or money to hire a full-time “-ologist of anything,” Murphy said. But if they can share one with another hospital, then it could be worthwhile.

Dr. Sean Bears worked at New London Hospital for 15 years, both in private practice and as an employee. Now, Bears’ paycheck is stamped by Dartmouth-Hitchcock. It’s an arrangement similar to King’s.

Not that Bears minds. He still spends four days a week in New London and Wednesdays in Lebanon. The arrangement, which happened before the affiliation became official but while the two hospitals were in discussions, has changed the way he thinks about his practice.

Before, there was never much of a question about where he would operate. His patients would be taken care of in New London. Now, he has an option. A routine gall bladder surgery might be better performed in New London — a smaller, simpler and perhaps more comfortable place for the patient. But if it’s a complicated case, Bears can head up to Dartmouth-Hitchcock, where there is a wealth of specialists to consult.

There’s no fighting between the two hospitals over who “owns” that patient. Or, at least, none that he sees. All he has to worry about is where that patient will receive the most appropriate level of care.

“Generally, it makes things easier,” Bears said one recent morning. “I try to do the surgery where it’s best for the patient.”

Ideally, this is how an affiliation will affect everyone’s thinking, Murphy said. And not just for New London staff. Dartmouth-Hitchcock benefits by having its reach extend into smaller communities, where already-established physicians have plenty to teach the larger institution about patient care in a more intimate setting.

Murphy compared the arrangement to a large aircraft carrier surrounded by a battle fleet.

“If they don’t have the support boats around it, that carrier sinks,” he said. “I don’t care how big it is. We’re here to take care of the health of this section, in this region. If that battleship is up there by itself, it’s going to sink.

“They really need us as community hospitals.”

Collaboration and Concerns

This is not the only avenue that Dartmouth-Hitchcock’s CEO Jim Weinstein is pursuing toward his larger vision for a collaborative network of hospitals.

The hospital has a variety of relationships that link hospitals through new payment models with insurers, shared staff, contracts for services such as lab testing and agreements to share best practices on clinical care.

Another model is the accountable care organization, or ACO. Developed at Dartmouth and included in the Affordable Care Act, the ACO concept is aimed at reining in health care spending while maintaining, or even improving, the quality of care. If successful, ACO providers get to split the savings with the federal government. But it is not without risk. If costs go above a certain threshold, then hospitals share the losses.

Dartmouth-Hitchcock is at the center of two ACOs — one in New Hampshire and one in Vermont. The New Hampshire ACO is the riskier of the two, as the model in Vermont poses no downside risk for hospitals (that is, they don’t lose money if they miss their targets). As such, Vermont has had an easier time getting hospitals on board. All of the state’s 14 hospitals are participating in the so-called “OneCare” ACO.

Last year, New London was the first hospital in New Hampshire to join Dartmouth-Hitchcock’s ACO. The gamble, so far, appears to have come out in New London’s favor. Dartmouth-Hitchcock was among the few ACOs that actually hit all its targets while saving money in the first year. After that success, three more hospitals — Manchester’s Catholic Medical Center, St. Joseph Healthcare in Nashua, and Exeter Health Resources in Exeter — agreed to come on board this year.

However, the affiliations are a stronger kind of relationship. They give Dartmouth-Hitchcock some degree of control over the smaller hospital. And that’s what concerns state and federal regulators.

In 2011, Dartmouth-Hitchcock ended an effort to affiliate with Catholic Medical Center after then-New Hampshire Attorney General Michael Delaney objected to the plan, likening it to a takeover of CMC by Dartmouth-Hitchcock.

The proposal to merge a Catholic hospital with a secular medical center also drew strong opposition from abortion opponents.

The affiliation with New London is a different situation, said Rienzo, of the attorney general’s office. The two hospitals don’t really compete for patients, he said. Indeed, most community hospitals do not compete. He cited a study, done 14 years ago for New Hampshire’s Department of Health and Human Services, that concluded the hospital system in the state was not competitive at all. Patients do not choose their health care providers the same way that they choose to buy, say, gasoline for their car or light bulbs for their home.

“People generally did not go outside the hospital’s established service area,” he said. “That is not a competitive market. What you had was a series of natural monopolies.”

If they aren’t competitors anyway, Rienzo said, then collaboration among hospitals is unlikely to affect prices for consumers. But that study was done during a different time in the health care industry, which is why Rienzo said he is proceeding cautiously with these other affiliations.

“The question I have is, in 15 years since that DHHS study was done, what’s changed?” he asked. “And are the changes enough that we would re-evaluate the conclusion it reached. My thought is, it’s possible.”

There is reason to be skeptical. Hospital mergers in other areas of the U.S. have given hospitals and doctors greater leverage to raise prices. A recent study published in the journal Health Affairs found that the highest -priced hospitals tended to be larger, major teaching hospitals that belong to systems with large market shares . Yet they offered no better quality of care.

Federal regulators and the courts have responded by cracking down on mergers. In January, the U.S. District Court in Idaho rejected a bid by a Boise-based hospital chain to buy a large physician practice group, saying the deal violated federal antitrust laws.

There are even concerns about the ACOs. The Federal Trade Commission and Department of Justice developed guidelines for ACOs warning that certain actions, such as demanding that insurers keep prices and quality information from patients, would raise competitive concerns.

Saini, of the Lown Institute, said he would like more transparency in how ACOs use the money they save. Does it go back to patients, or is it simply fattening the institution’s wallet?

“I think what would be in the public interest is to have a seat at the table where discussions of savings are underway. Where do (savings) go?” he said.

“Are they just going to fill the coffers of the health care institution and increase their market share so that, eventually, the United States will basically have five systems duking it out … which is insane.

“But if the winners keep winning and winning and we keep going in a winner-take-all culture, then it’s not going to feel like down home, local community-focused health care.”

LeBlanc, of Dartmouth-Hitchcock, acknowledged the concerns with hospital mergers. But this situation is different, he said. First, with the New London affiliation, both hospitals had to be explicit that they were not merely trying to build muscle to control the health care market and raise prices for payers. Both hospitals will continue to negotiate rates with insurers separately.

Also, those mergers tend to happen in urban areas where hospitals are trying to gain leverage in a competitive market. That’s not the case in rural regions, where the market isn’t competitive to begin with and a loose network of hospitals is offering redundant and expensive services.

“We’re not going to have a viable health system if we’ve got all these independent entities over a fairly rural population,” LeBlanc said. “You’ve got to be able to find ways to take the costs out and not replicate things that aren’t necessary to replicate. We think that the communities will benefit from this. … And we’re willing to be held accountable for delivering on that.”

Building Trust

As she stood before a room packed with hospital employees in January, Sue Mooney laid out her argument for Alice Peck Day Memorial Hospital to affiliate with Dartmouth-Hitchcock.

The industry was changing fast, and a partnership would help both institutions prepare for a world in which the payment models and delivery of care would be radically different, said Mooney, APD’s CEO. They already cared for many of the same patients. Why not take the next step in the relationship?

“We don’t admit it, but the reality is that our two organizations are intertwined,” she said.

The Jan. 24 announcement came only four days after Mt. Ascutney Hospital and Health Center announced its intentions to affiliate with D-H. And that news was followed several weeks later by Cheshire Medical Center’s intentions to do the same.

Both Mt. Ascutney and APD finished their fiscal years in the black. For Mt. Ascutney, it was the first time in five years it had finished with a positive margin.

Still, concerns for the long-term viability of small hospitals remain very real at both places, and officials said.

“The price of not acting is likely going to be financial failure for the organization in the future,” Mooney said. “Doing nothing is a recipe for disaster.”

But affiliation with Dartmouth-Hitchcock is not certain to solve financial problems. At least, not in the short term.

Several weeks ago, New London Hospital announced it would be cutting jobs, benefits and holding off on building a health center in Newport. The hospital had fallen $1.9 million short of its gross revenue goals through the first three months of its fiscal year that began Oct. 1, coinciding with the beginning of its affiliation.

The losses did not come as a result of affiliation, officials said in a document distributed to staff. In fact, Dartmouth-Hitchcock helped transfer more patients to the hospital and the affiliation “puts us in a stronger position to weather the challenges of being a smaller community access hospital.” Still, it wasn’t enough to overcome the immediate financial crisis.

Collaborating with Dartmouth-Hitchcock isn’t about finding a bigger life raft in stormy waters, hospital officials said, or even squeezing money from insurers. It is part of a larger vision for how hospitals interact with patients.

“This really isn’t focused on how can we negotiate with insurance carriers,” said Kevin Donovan, Mt. Ascutney’s CEO. “This is focused on how can we collaborate and appropriately provide clinical services to a large population of people.”

In other words, forget the nickle-and-dime stuff and who gets paid to provide which procedures.

When and if hospitals get paid one lump sum of money, regardless of whether a patient is healthy or sick, it will behoove them to keep patients healthy. That means working in a system that doesn’t double up on its efforts, one in which communication is seamless and where patients are treated in the most cost-effective, appropriate place.

At least, that’s the stated ideal. Getting everyone to believe in it is another matter.

“There are a lot of barriers to be broken down,” said Bears, the New London surgeon. “ ‘OK, this is our patient or their patient,’ when we should be thinking about how to take care of patients together.”

Step one is building a level of trust.

“There has not always been the best relationship between community hospitals and Dartmouth,” Bears said. “Hopefully, that will be changing.”

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