Two metro Atlanta hospital systems announced Monday that they are forming a partnership, and they predict it will improve medical quality and reduce costs in a health care marketplace remodeled by the Affordable Care Act.
Piedmont Healthcare and WellStar Health System will create the Georgia Health Collaborative, combining 2,393 hospital beds, 10 hospitals, seven urgent care centers and more than 700 physicians.
The two systems will double their geographic spread in a move that is likely to increase their already considerable leverage with health insurance companies.
WellStar dominates the suburbs west and northwest of Atlanta, while Piedmont has extensive operations south of the city, along with its prestigious Buckhead hospital.
“Our footprints are very complementary to each other,’’ said Reynold Jennings, president and CEO of WellStar, in an interview with GHN on Monday.
Jennings and Dr. Patrick Battey, chairman of the Piedmont Healthcare board of directors and interim CEO, cited the health reform law as an impetus for their collaboration.
The reform law, officially called the Affordable Care Act, has met considerable resistance since its passage in 2010. But the U.S. Supreme Court upheld it earlier this year, and Republican presidential candidate Mitt Romney, who had vowed to undo it, lost to President Barack Obama last week.
Even if Romney had won, repeal of the Affordable Care Act ‘‘would have been difficult’’ with the U.S. Senate still under Democrats’ control, Jennings said. “It was going to be full speed ahead.’’
Democrats actually increased their edge in the Senate in last week’s vote, leaving the Republican-controlled U.S. House with no options to overturn the ACA.
Discussions between Piedmont and WellStar have gone on for about a year. “We have a common view of the future and a lot of similarities,’’ Battey said.
The nation has seen many full-scale hospital mergers recently. But some hospital systems don’t want to go that far. They are looking to stay independent while gaining size and territorial reach by forming alliances with one another.
The partnership of the two Atlanta-area nonprofits is modeled after a similar collaborative among systems near Cleveland, Ohio. There, three hospital systems formed a new organization while retaining their autonomy.
Another alliance was formed recently across Midwestern states, bringing together hospital systems in St. Louis, Kansas City, Mo., Springfield, Mo., and Springfield, Ill.
Consolidation among hospitals has accelerated over the past two years since the passage of the ACA, and the trend may accelerate now that the fight over the law is effectively settled.
Seeking better outcomes
Piedmont and WellStar said they are uniquely positioned to work together to achieve improved clinical results and reductions in costs as required by the 2010 law.
Battey and Jennings spoke of better managing the serious chronic conditions that make some people heavy users of medical services. The goal is to deliver care based not on the number of procedures done, but on better management of a patient’s conditions. If that is achieved, it would reduce costs and the boost quality of care, they said.
Through health reform and Medicare, the federal government is already revamping the payment system for medical providers by emphasizing the value of care, not the volume of procedures.
“We need to position ourselves as the drivers in the market to manage population health,’’ Battey said. “It’s what the large employers want.’’
Both Piedmont and WellStar have created their own accountable care organizations. These organizations — encouraged in the health reform law — link physicians and hospital and aim to provide more coordinated and integrated care.
The new collaborative has the potential to shake up the hospital market in metro Atlanta.
“This is another sign that the race for scale is really heating up,’’ said Brad Guest of the consulting firm Subsidium Healthcare in Atlanta.
But he added, “Regardless of the benefits of scale, health care will always remain local — quality of care and how your footprint matches up with your community.’’
In terms of competition among hospital systems, the latest alliance would leave only two very large players in metro Atlanta: WellStar/Piedmont and Emory Healthcare.
It’s unclear whether a third alliance will be formed to compete with these two giants. “We’ll have to see,’’ said Charles Goldberg, an Atlanta-based health care consultant.
He said the Piedmont/WellStar collaboration might seem somewhat unusual, considering the two organizations’ history. Each had hospitals in an earlier alliance, Promina Health System, which fell apart roughly a decade ago.
But Goldberg added, “Given the current market dynamics, [the new partnership] is not a surprise.’’
Frank Lordeman will serve as executive director of the collaborative. Lordeman recently helped establish the Community Health Collaborative in Cleveland, Ohio.
Both WellStar and Piedmont have a large number of physicians on their payrolls. Battey said physicians will be creating the medical protocols for the new models of care that the alliance will pursue.
The two current systems have the same information technology vendor, which should help with their integration, Jennings said.
WellStar and Piedmont will still compete with each other in certain areas, Jennings said. But he added that with the collaborative, “We see the greater gain for our local citizens and our two systems.’’