Spectrum Is Hub Of New Network

May 2, 2003
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By forming a network with its smaller counterparts in the market, Spectrum Health is sharing the benefits of size from both an economical and clinical standpoint, while seeking to aid the finances of the region’s independent community hospitals.

Creation of the new Spectrum Health Regional Hospital Network strengthens the formal and informal cooperation that already exists between Spectrum and community hospitals around the region.

The goal behind the new network is to help all players involved to improve their operations in an era of escalating health care costs and intense financial pressures by driving out costs and improving the quality of care.

“Through communication and collaboration we’ll strive to improve both how we work together and how we operate individually as a community resource,” said Spectrum Health President and Chief Executive Officer Richard Breon said. “It’s our hope that this network will grow and become an important asset in developing coordinated community-based resources with access to necessary tertiary care.”

At the onset, the hospitals and health systems participating with Spectrum in the network can benefit financially by leveraging Spectrum’s sizeable buying power that commands discounts on supplies, equipment and services – discounts they could not receive on their own. Spectrum itself will also benefit, since bringing more players into the purchasing alliance results in increased volumes and better pricing.

In the long run, participants say, creation of a cohesive regional network brings most of the hospitals in the market together in a new forum that they hope can better open lines of communications and collaboration on major medical and operational issues. Among them are the sharing of best medical and administrative practices, referral patterns and practices between hospitals, a streamlined physician credentialing process, regulatory compliance, safety and quality initiatives, preventing costly service duplications, and crafting common clinical protocols.

To Henry Veenstra, the long-time president of Zeeland Community Hospital, that aspect of the regional network holds the most promise. He calls the opportunity for increased collaboration and cooperation among West Michigan’s hospitals “a real plus.”

“It provides a mechanism where we can get together and talk in a tangible way,” said Veenstra, who served on the planning team for the network.

“It gives us an opportunity to sit down and see how we can work to make health care in West Michigan make more sense, not only for ourselves but for the patients,” he said. “Maybe we can find ways we can help each other.”

Joining with the Grand Rapids health system to form the Spectrum Health Regional Hospital Network are: Metropolitan Hospital in Grand Rapids, Holland Community Hospital, Zeeland Community Hospital, North Ottawa Community Hospital in Grand Haven, Greenville’s United Memorial Health System, Mary Free Bed Hospital & Rehabilitation Center and Pine Rest Christian Mental Health Services in Grand Rapids, Ionia County Memorial Hospital, Gerber Memorial Hospital in Fremont, and Memorial Medical Center of West Michigan in Ludington.

The non-exclusive purchasing alliance does not preclude hospitals from participation in an existing or future similar arrangement with others.

Noticeably absent from the list are Saint Mary’s Mercy Medical Center in Grand Rapids and Mercy General Health Partners in Muskegon, both of which are owned by Trinity Health, the Novi-based health system that own and operates 43 hospitals in the U.S. and provides an even larger purchasing and knowledge-sharing network than the one Spectrum has formed.

Arrangements like the Spectrum Health Regional Hospital Network are becoming more prevalent across the nation, as large tertiary care health systems connect with smaller primary-care counterparts for a variety of reasons, said Kelly Devers, a researcher with the health care think tank Center for the Study of Health System Change in Washington, D.C.

That kind of “virtual integration” that offers a purchasing alliance and the sharing of best practices and knowledge hold promise, kind of “a rising tide lifts all boats situation,” Devers said.

Yet there are also self-interests involved, she said. By extending a hand down to the smaller hospitals, a large tertiary care system can build goodwill and its public image, as well as assure the flow of patient referrals for big-ticket specialized care.

“They want to keep good relations with all the hospitals so they get their referrals for their tertiary care services,” Devers said. “If they’re involved a network, they (the community hospitals) may be more inclined to send them more of their business.”

Participation in a regional network also may make a smaller hospital less inclined to compete in a key clinical service area as well as allow for further integration of a large regional health system without an entity running into anti-trust problems, Devers said.

“You can help them out without undermining your own competitive position,” she said.

By far the largest health system in West Michigan, and the dominant provider of tertiary care, Spectrum Health is often derided by some as an “800-pound gorilla” (or some other weighty figure) that wants total domination of the region’s health care system. Spectrum’s size generates a certain suspicion and apprehension within the health care community about its motives and intentions toward other hospitals in the market.

Yet in connecting with its smaller primary-care counterparts, Spectrum Health is essentially working to aid the fiscal health of the region’s independent community hospitals that refer large volumes of patients to the Grand Rapids health system for tertiary care.

And the manner in which the regional network has been formed has eased some of the apprehensions among community hospitals about doing business with Spectrum, executives say, even as they hitch their wagons a little tighter to the health system.

“They have gone way out of their way to make the independent piece of this clear,” Holland Community Hospital President and CEO Dale Sowders said.

Providing support for community hospitals via the non-exclusive purchasing alliance and cooperative network helps to bolster the region’s overall health care system, said John Mosley, Spectrum Health’s corporate vice president for strategy and business development.

The community hospitals represent the “cornerstone” of the health care network in West Michigan, he said.

“We’re committed, as Spectrum Health, to the community hospitals. What they can do in their communities, they need to do,” Mosley said. “They are very, very vital to the health of West Michigan. Anything we can do to help them economically and from a patient care standpoint is the right thing to do.”

The purchasing alliance alone is projected to save Zeeland Community Hospital $50,000 to $60,000 annually on general medical supplies, Veenstra said. The Zeeland spends about $1 million a year on supplies.

Hackley Hospital in Muskegon has generated about $750,000 in savings on $16 million in supply purchases since becoming a Spectrum affiliate in January 2001, spokesman Stuart Jones said.

In Grand Haven, North Ottawa Community Hospital CEO Mike Payne estimates the potential savings on supply purchases at up to $200,000 annually. That kind of savings potential made joining the network an easy decision, Payne said.

Becoming part of the Spectrum network also follows with North Ottawa’s strategy of increasing its collaboration with other hospitals and care providers in the region.

“It was pretty much a no-brainer,” Payne said of the hospital’s decision to join the network.

Sowders couldn’t place an estimate on Holland Community Hospital’s potential savings from the purchasing alliance, although “it could be substantial,” he said. Like his counterpart in Zeeland, Sowders sees a larger dividend in the increased collaboration that can result from the new network.

“The more we can do that, the more that is icing on the cake,” Sowders said.

And the icing won’t necessarily get spread one way.

Spectrum, in strengthening ties with the region’s community hospitals, can learn a few things as well, Mosley said.

“There’s a lot of good thinking in the community hospitals. We don’t have all the answers,” Mosley said. “It’s not a one-way street; it’s definitely two way. We learn from each other to benefit all of us.”        

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