Metro, Trinity, U-M create services alliance

September 24, 2010
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Metro Health of Wyoming, Novi-based Trinity Health and the University of Michigan Health System in Ann Arbor last week launched Pennant Health Alliance to provide “back-room” services to community hospitals and doctors’ groups.

Pennant will offer members an opportunity to tie together for services such as physician recruitment and group purchasing but preserve independent ownership and local control.

Those two issues have bubbled to the surface as several hospitals in western Michigan recently have grappled with whether to become part of Grand Rapids’ market-leading health system, Spectrum Health.

Industry changes under health care reform and revamped payment systems are prompting providers to band together in all sorts of ways, said Grand Valley State University Professor Steve Borders. Some seek refuge in a bigger health system, such as Spectrum Health, while others try to band together in more targeted connections.

“It’s just a reaction to what’s coming,” said Borders, who teaches health care policy. “Prices are going to get hammered. They are going to get hammered on this fee-for-service notion. You’re going to have to be more efficient. It will be harder and harder to survive if you’ve got high overhead.”

Driving down those costs will help to sustain the finances of Pennant Health Alliance members, Roger Spoelman, CEO of Trinity Health’s Mercy Health Partners in Muskegon and leader of its West Michigan group.

“It’s not as much about competitiveness, although this will make all of us and those who align with us more competitive and more sustainable in the long run,” he said. “It’s really about choice and it’s about flexibility. There are models that feel that they have the answer for responding to health care reform and there are some that don’t agree with it. So we provide just some flexibility and other option.”

Metro Health CEO Mike Faas, who will take on the Pennant CEO role part-time, said six to eight hospitals currently are looking seriously at signing up.

Pennant Health Alliance’s planned services include physician alignment and recruitment, health information technology, revenue cycle management and group purchasing, plus practice management services and help with clinical quality and pay-for-performance program support. Custom services also will be available, such as quality consulting and performance reporting.

Doctors would be able to use Pennant Health Alliance to participate in managed care agreements that require membership in an “accountable care organization” and achieve federal standards in electronic health records in order to qualify for higher payments, according to Pennant’s fact sheet.

“We did a number of surveys…and these were the things that most commonly were mentioned and seemed to be of the biggest concern,” Faas said.

Spoelman and Faas both said they expect that Pennant Health members will be able to tap into clinical and research expertise through the connection with the University of Michigan Health System.

Doug Strong, CEO of the University of Michigan Hospitals and Health Centers, told the Business Journal that a successful Pennant launch in providing services could eventually lead to access to capital for smaller hospitals, which often face higher costs and interest rates in the bond market.

Cheaper access to capital was cited by several hospitals that have participated in talks with Spectrum, including Munson Healthcare in Traverse City and Northern Michigan Regional Hospital in Petoskey. Both this summer decided to end their exclusive due diligence with Spectrum.

“If this alliance evolved well and it’s strong and we can see the strength and we are engaging with other independent hospitals and physician groups, it would be a logical step in the future to think about helping people and making capital investments,” Strong said.

“In theory — this is all hypothetical — this could be done as an alliance or in fact it could be done separately by Trinity or separately by the University of Michigan,” he said.

“It’s a fact that there’s capital stress in health care, particularly in hospitals. And it is likely to grow in the future. So those who are in need of capital are going to be faced with finding capital or adjusting themselves very substantially. So I expect that a beacon, like this alliance is expected to be, will attract conversations about capital.”

In the meantime, the alliance segues with U-M’s commitment to improve health care across the state, he said.

“We have a three-part goal of keeping care local when it’s appropriate, and improving and enhancing local care to extent that we can, and then if patients need to go outside of a local area to receive different kinds of care, we hope that they choose us for that care.”

Spoelman said the Catholic health care organization’s billing center on 44th Street SE would become part of Pennant Health Alliance. The center handles operations for the Battle Creek, Grand Rapids and Muskegon hospitals as well as several others.

Trinity Health’s West Michigan hospitals are joining Pennant, including Saint Mary’s Health Care in Grand Rapids, Mercy Health Partners in Muskegon, Battle Creek Health System, Mercy Hospital — Cadillac and Mercy Hospital — Grayling.

Saint Mary’s Health Care President & CEO Phil McCorkle said that the hospitals in Cadillac and Grayling still have service contracts with Munson but no longer have management contracts with the Traverse City system.

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