Goshen Health’s CEO says the hospital isn’t interested in a new affiliation but is willing to partner on service lines.

Oct. 7—The healthcare industry’s march toward consolidation took a small step backward Oct. 7, as the 122-bed hospital in Goshen, Ind., changed its name from IU Health Goshen to Goshen Health as part of its movement away from the Indiana University (IU) Health system.

“We’re in the process of ending our affiliation with IU Health; it will probably take us to the end of the year,” said Randy Christophel, president and CEO of Goshen Health. “For the last year and a half, we’ve been moving in this direction.”

Current trends see community hospitals either closing or joining larger systems, so what Goshen is doing runs counter to both of those movements, Yevgeniy Feyman, a senior research assistant at the Harvard School of Public Health and an adjunct fellow at the Manhattan Institute, said in an interview.

“I haven’t heard of something like this happening absent a divestiture required by the Federal Trade Commission or the courts—the trend is certainly toward consolidation and acquisition,” Feyman said. “So this is certainly bucking the trend, but I don’t expect this to be a new trend taking off.”

Hospital consolidation is promoted as a means to achieve increased efficiency, improved care coordination, and lower costs though economies of scale. But the theoretical and actual benefits of consolidation have proven to be “mostly undetectable,” Feyman wrote in an essaypublished in National Affairs in July.

“But the reality—according to years of independent academic inquiry—is that these benefits are much more meager than advocates would have us believe, and the harms are much more severe,” Feyman wrote. “Simply put, hospital consolidation has few positive effects and many harmful ones.”

Hospital consolidation last peaked in 1997, and Feyman said it may return soon to those levels.

“Since passage of the Affordable Care Act, mergers have been on the rise,” Feyman said. “They haven’t hit peak levels yet, but it’s getting there.”

Conversely, the need for healthcare consolidation was famously summarized by Kenneth Davis, MD, president and CEO of Mount Sinai Health System in New York City, in a Sept. 15, 2014, op-ed column in the Wall Street Journal.

 “The fear that mergers curtail competition, leading to higher prices for medical care, reflects an old way of thinking that doesn’t account for the introduction of population-health management,” Davis wrote. He added that mergers promote the delivery of high-quality, better-coordinated care, while rooting out unnecessary costs.

In 2015, healthcare consolidation reached record levels for recent years with 1,503 deals valued at $557 billion, up from 1,318 deals valued at $388 billion in 2014. These figures included 102 hospital transactions (compared to 99 in 2014) and 88 physician medical group transactions (compared to 60 in 2014).

Another critic of healthcare “gigantism” is Farzad Mostashari, MD, the former national coordinator for health IT. In a July interview, Mostashari compared healthcare consolidation to providers donning heavier and heavier armor that is causing them to lose the agility needed to adapt to the change that’s coming with new payment systems.

Christophel, Goshen’s CEO, echoed this sentiment and noted the split “gives us the flexibility to drive clinical service lines in a way that we weren’t before.”

Geographic Differences

However, the decision to break from IU Health was largely precipitated by Goshen’s geographic isolation from the rest of the 17-hospital system, Christophel said.

While IU Health’s growth strategy is focused on central Indiana, Goshen is located in the northwestern corner of the state, and its coverage area includes southern Michigan. It’s looking to expand to the east and west. When it came to population health strategies, Goshen and the parent company had little in common.

Goshen is located 150 miles north of Indianapolis, 25 miles southeast of South Bend, Ind., and 120 miles east of Chicago. Howard Hawks, director of the 1932 classic gangster movie “Scarface,” was born there in 1896, and the town is home to the Recreational Vehicle/Manufactured Housing Hall of Fame.

The city has almost 33,000 residents and a median household income of around $40,260, according to U.S. Census statistics. More than 77 percent of its residents graduated high school, more than 21 percent have a bachelor’s degree, and—despite an unemployment rate of only 4.6 percent—more than 24 percent of residents live in poverty and almost 24 percent of residents younger than 65 lack health insurance.

“IU Health is a great organization,” Christophel said. “But the preponderance of their facilities and physicians is in central Indiana, so we were focusing on different geographies with different needs based on that geography.”

Anchored by the hospital, Goshen Health has 27 locations and 369 physicians, nurse practitioners, and physician assistants—about half of whom are employed. It has its own health plan, and in 2000 it joined Clarion Health Partners, which was rebranded as IU Health in 2011.

At a recent conference on creating clinically and financially integrated delivery systems, Larry Allen, MD,  chief medical officer of Goshen, described how the system built a robust population health network on the medical home practice model, which uses nurses as care coordinators.

“We’ve embedded nurses into the patient-centered medical homes and that’s really, really helped,” Allen said. “Every year, I keep adding FTEs in social work, and it seems to pay for itself.”

Christophel noted Goshen is one of the few healthcare organizations in the region that employs full-time smoking cessation professionals and is planning efforts to meet the needs of socially isolated individuals with multiple chronic health conditions.

IU Health issued a prepared statement on Goshen’s departure.

“IU Health Goshen Hospital will be leaving the IU Health System to serve its surrounding communities under the Goshen Health name,” the statement said. “Patients of the new Goshen Health will continue to have access to specialists and subspecialists at the IU Health academic health center in Indianapolis, including Riley Hospital for Children at IU Health.”

Pain Point

Feyman noted that leaving a system can be an expensive proposition. But Christophel said Goshen has been operating with relative autonomy for some time, with its own office personnel, and that affiliation-related economies of scale instead can be gained through group purchasing organizations.

“There’s nothing with IU Health that has to be undone,” Christophel said. “The biggest pain point is changing signs, business cards, and uniforms with old logos on them.”

There’s no model for starting an independent system after breaking away from a parent organization. Christophel said “we’re doing this from scratch” and from knowledge gained based on IU Health’s 2011 rebranding experience.

Allen noted that “we’re working together in ways we never did before.” And Christophel said Goshen wasn’t interested in affiliating with a large system again but was open to partnering with other systems on population health and building oncology, heart and vascular, and orthopedic service lines.

“The strategy is not to do an overall organizational affiliation,” Christophel said. “We don’t see the benefit.”

Feyman said that succeeding as an independent entity likely would require Goshen, which is usually at 50 percent capacity, to get busier. He also suggested the organization has to focus on the services it thinks it does better than its competitors.

“The way you succeed as an individual hospital is that you have to specialize—the days of the general hospital are long gone,” Feyman said. “You need to offer something unique and do it well. Having your own brand helps.”

Andis Robeznieks is a freelance writer based in Chicago. Follow Andis on Twitter at @AndisRobeznieks.

Publication Date: Friday, October 07, 2016