Marietta-based WellStar is planning to add another hospital system to its fold, one that’s outside its current geographical sweet spot.
West Georgia Health in LaGrange announced Tuesday that it has signed a letter of intent to join WellStar Health System, which dominates the northwest Atlanta suburbs.
The CEO of West Georgia, Jerry Fulks, cited the changes rampant in health care payments — many of which were ignited by the Affordable Care Act — for his system’s yearlong pursuit of a partner.
West Georgia Medical Center would become the sixth hospital in the nonprofit WellStar system, though it’s the first one that’s not in Atlanta’s suburbs.
Meanwhile, WellStar is still working on a potential blockbuster merger with Emory Healthcare in metro Atlanta.
Fulks said Tuesday that West Georgia Health, the parent of the medical center, was seeking a partner with at least $1 billion in revenues, which WellStar surpasses. “We wanted an organization that’s focused on physicians and employees,’’ Fulks added.
He noted that payment shifts from Medicare and private insurers are emphasizing quality of care, rather than just paying for quantity of procedures. Medicare is penalizing hospitals for high rates of patient readmissions soon after discharge. It is also paying bonuses and exacting penalties under the ACA based on quality-of-care measurements.
“We believe our survival and ability to thrive is dependent on some type of alignment with another [health care] provider,’’ Fulks said.
West Georgia said its hospital is now operating in the black after losses in previous fiscal years. Fulks said the organizations’ goal is to close the deal by end of the year.
Reynold Jennings, CEO of WellStar, told GHN on Tuesday that such hospital partnership discussions “are going on all over Georgia.”
Achieving economies of scale to decrease costs is helping drive this consolidation, Jennings said.
He noted that the Obama administration wants to move a large amount of Medicare payments away from a fee-for-service model that is based on volume to a system based on value linked to patient outcomes, performance and quality of care. Private insurers such as Aetna are also moving reimbursement in the same direction, he added.
Part of this shift is paying for a “bundle” of medical services, rather than paying separately for individual procedures or tests.
The pace of change in the health care business is more rapid than ever, Jennings said.
Jennings said LaGrange is in a broad Georgia geographic target region for WellStar that includes Calhoun, Jasper, Rome, and Carrollton.
And WellStar may not be through with forming such alliances. “We believe that over the next three years, other opportunities will emerge,” Jennings said.
Dave Smith, a consultant for Kearny Street Consulting in Alpharetta, said Tuesday that the agreement “is a good move for WellStar. It secures the western part of Georgia for them.”
He added that standalone hospitals such as West Georgia Medical Center face a shaky future if they don’t find partners.
With hospital reimbursements going down and costs going up, Smith said, “It’s getting tougher and tougher for independents to make it.’’