For-Profit Specialty Centers &
Community Hospitals

MedCath Corporation has traditionally developed freestanding cardiac care centers that have siphoned patients away from a lucrative revenue source for many general acute care hospitals. The 2003 Medicare Modernization Act enacted an 18-month moratorium on new physician-owned specialty hospitals, forcing MedCath to consider alternative methods for growing volume. In July 2004 MedCath announced plans to joint venture with two North Carolina hospitals----Grace Hospital and Caldwell Memorial Hospital. MedCath will help these hospitals build and manage cardiac catherization laboratories.

State, County, and City Government

The state of Michigan, Wayne County, and the city of Detroit, along with numerous hospitals, health centers, insurance companies, and community organizations are cooperating to address uninsurance and underinsurance issues. These organizations and groups have typically competed for limited funding, including grants, designated to care for the uninsured and underinsured. By pooling financial and intellectual resources to create the Detroit Wayne County Health Authority, they hope to optimize their ability to provide health services.

Community Hospitals and Children’s Hospitals

The battle between community hospitals and children’s hospitals for pediatric market share is waning. Many community-based hospitals have closed inpatient pediatric units while children’s hospitals continue to expand and be built. Nevertheless many community hospitals are committed to serving the needs of children as well as adults. In Ohio, Summa Health System and Akron Children’s Hospital formed a joint venture to build an 80,000 square-foot outpatient care facility for pediatric and adult care. The new facility will provide the community one-stop outpatient care for the entire family.

Community Hospitals

In Philadelphia, Methodist Hospital and St. Agnes Medical Center, long-time competitors within walking distance of each other, agreed to stop competing for the same patients and start offering complementary services. Both community hospitals had been losing money and realized that collaboration would be best for the community. Methodist Hospital will expand its role as a community hospital and maintain its surgery service and emergency room. St. Agnes Medical Center has become St. Agnes Continuing Care Center and will provide programs for the elderly including long-term acute care, skilled nursing, home health, and hospice services.

Success Factors

Although these collaborations are in early stages of development, there are lessons to be learned from each of them.

Share a common goal – A common goal can keep organizations focused on the benefits of collaboration. Both St. Agnes Medical Center and Methodist Hospital were committed to serving the health care needs of South Philadelphia residents. Unfortunately both organizations struggled to fulfill their missions and remain financially viable. Because the two organizations chose collaboration over competition, health services have remained in the community, the breadth of services available has expanded, and both organizations have a chance to be financially successful.

Engage in activities that are mutually beneficial – Partners are more likely to stay engaged when all benefit from the collaboration. Both MedCath and the hospitals they partner with realize significant gains from their joint venture. MedCath acquires access to a new community and the opportunity to grow business. The hospital is able to enhance and improve its services with the financial assistance of another organization.

Garner support and commitment from key leaders – Leadership support is necessary to stay focused and successfully implement and sustain collaboration. The formation of the Detroit Wayne County Health Authority required leadership from the heads of state, county, and city government. Their involvement was necessary to create an agreed-upon structure and approach for delivering health care to the uninsured and underinsured of Detroit and Wayne County. Each municipality nominated key leaders for the authority and has the ability to allocate funds necessary for its strength and operation.

Commit the time necessary to structure and implement the partnership – Developing and maintaining collaborations can be a lengthy process. It took Summa Health System and Akron Children’s Hospital more than five years to agree upon creating a joint outpatient facility. Construction is expected to take another year, and additional time will be needed to adjust to working together and sharing space and services.

Use the strengths of those involved – It is important to discover how each organization’s strengths can be used for mutual benefit. Summa Health System’s strength is providing care to adults. Akron Children’s Hospital’s strength lies in providing pediatric care. Both organizations have been nationally recognized for the quality care they provide. Together they can provide quality care for all ages.

High uninsurance rates, demands for high-quality care, expensive new technologies and other cost pressures, and insufficient reimbursement will continue to challenge health care providers. Organizations should consider innovative strategies, such as collaboration with former competitors, to ensure viability and fulfill community health needs.

For more information on collaboration strategies, contact Andrea Shellman or Alan Zuckerman, or call 215-636-3500.