In response to healthcare reform, terms such as “physician alignment strategies” and “physician integration” have resurfaced in our vocabulary as healthcare providers.  In our new healthcare environment, many experts advocate that only hospitals that are aligned, or integrated, with their physician providers will be able to organize delivery systems that are capable of meeting current and future demands for efficiency, quality, price and services expected from patients and payers.  As the demands on health care providers continue to escalate, will experts also someday advocate that only hospitals that are aligned with other hospitals, or other health systems, be positioned to meet the then-current and future expectations related to providing high-quality and cost-efficient health care?

As the future of hospital and physician alignment strategies continue to evolve, more physicians, hospitals and health systems are affiliating.  Even large organizations such hospitals and health systems are teaming together to form loose associations in order to better manage the demands for efficiency, quality, price and service being thrust upon all providers by health reform, payers and patients.

There are a number of recent examples of health systems and hospitals forming strategic alignments to better manage healthcare costs and patient care.  As recent as September 19, 2013, Modern Healthcare reported that 25 hospitals that form seven health systems in the states of New Jersey and Pennsylvania have formed an alliance, AllSpire Health Partners, with the hope that it will deliver monumental benefits without giving up independence.  According to the report, “AllSpire’s focus is on sharing best practices, managing healthcare in the region and harnessing the group’s collective purchasing power.”  In fact, the chairwoman of AllSpire’s Board of Trustees believes that healthcare alliances will be the growing trend and that those who try provide healthcare to patients alone will be disadvantaged.  Similarly, Modern Healthcare reported in August that Community Health Systems planned to team with Cleveland Clinic to become joint owners of Akron (Ohio) General Health System.  The rationale behind this affiliation is that these healthcare providers are working together bring “clinical expertise, capital resources, operational experience and innovation.”

These strategic alliances are announced on the heels of another recent hospital affiliation in middle and southern Georgia where 23 hospitals in conjunction with approximately 1,500 physicians formed Stratus Healthcare in what purports to be an effort to pool clinical (best practices) and financial resources, to coordinate health information and health information systems, and to manage patient healthcare in the region.  This Georgia alliance formed a non-profit limited liability company that was aimed at allowing its members to work together to improve patient outcomes and efficiency without compromising the independence of its individual organizations.  The same is true for the three Missouri hospital systems and the Illinois hospital system that formed the BJC Collaborative in late 2012.  These four systems, representing 31 hospitals, remain independently owned but the collaborative allows these participants to share staffing expertise and buying power in an effort to reduce health care costs.  Although it may be too early to see any concrete results from these affiliations, what this continued trend towards alignment tells us is that when it comes to improving healthcare and meeting the demands of health reform, more and more providers believe that two, four or even 25 minds working together might be better than one.

Our Insight, Your Advantage. If you are a healthcare provider, you may want to consider aligning your organization, even loosely, with another provider, organization, group, network or system in order to better manage costs, quality and efficiency.  Moreover, if you are considering creating a strategic alignment, you need to be informed and prepared in order to structure the affiliation in a manner that best meets your goals while protecting your organization.  Irrespective of the nature of the transaction, there are numerous business, legal and practical considerations that need to be addressed when constructing and forming healthcare provider alliances.  Some considerations are entity choice, tax implications, management concerns, anti-trust concerns, reimbursement considerations and dissolution.  With early and proper planning, the key terms of an arrangement that are most important to each party can be addressed in the transaction.  If structured properly, all parties to the affiliation have a greater chance of being satisfied with the outcome and in a better position to address healthcare reform mandates and their end goals of managing healthcare costs and providing high-quality and efficient patient care.