Don’t lump Pin­na­cleHealth-Her­shey deal with failed merg­ers

Modern Healthcare - - COMMENT -

Re­gard­ing the Vi­tal Signs blog post “Hos­pi­tal merg­ers need to prove value and care co­or­di­na­tion,” (ModernHealth­, Nov. 29), I feel com­pelled to pro­vide ad­di­tional in­for­ma­tion to the article, which men­tions Pin­na­cleHealth Sys­tem’s pro­posed in­te­gra­tion with Penn State Her­shey.

The au­thor may be unaware that Pin­na­cleHealth was formed through the con­sol­i­da­tion of Poly­clinic Med­i­cal Cen­ter and Har­ris­burg Hos­pi­tal. The merger re­sulted in the elim­i­na­tion of 400 acute-care beds and a doc­u­mented $212 mil­lion sav­ings in its first five years as cal­cu­lated by an in­de­pen­dent econ­o­mist and con­firmed by the Pennsylvania at­tor­ney gen­eral. It ac­tu­ally low­ered costs and im­proved qual­ity.

Since its in­cep­tion, Pin­na­cleHealth has been and re­mains a low-cost, high­qual­ity provider—and is of­ten the part­ner of choice of in­sur­ers and lo­cal em­ploy­ers for nar­row net­work prod­ucts. Pin­na­cleHealth’s low cost-per­case is well-doc­u­mented in our re­gion.

In the late 1990s, Pin­na­cleHealth was the first hos­pi­tal in the re­gion to con­tract with most in­sur­ers on a case rate sys­tem. We as­sumed risk for the cost of in­pa­tient care long be­fore any com­pet­ing hospi­tals in the re­gion. The re­sult was that Pin­na­cleHealth man­aged length of stay and fo­cused on qual­ity and process im­prove­ments to avoid un­nec­es­sary stays and read­mis­sions.

In the case of this article, when call­ing out in­di­vid­ual hospi­tals and sys­tems as ex­am­ples, it’s im­por­tant to en­sure that they do, in fact, il­lus­trate the point the au­thor wishes to make. In this case, they do not. We should not be lumped as a failed merger with oth­ers that have not been as suc­cess­ful at low­er­ing costs and im­prov­ing qual­ity post-merger.

Pin­na­cleHealth and Her­shey were never given the chance to prove what we knew we could do. The gov­ern­ment ig­nored the fact that over 60% of the ser­vices we pro­vide are paid for by gov­ern­ment pro­grams (Medi­care and Med­i­cal As­sis­tance) that are not ne­go­ti­ated rates, and it also failed to rec­og­nize that more than half of these ser­vices are de­liv­ered on an out­pa­tient ba­sis, where there are many more com­peti­tors. Fur­ther, the gov­ern­ment as­sumed that be­cause you might have the ca­pac­ity to take ad­van­tage of insurance com­pa­nies in rate ne­go­ti­a­tions that you will; and, there­fore, you are deemed guilty with­out ever be­ing given an op­por­tu­nity to prove what you say you are go­ing to do. In Pin­na­cleHealth’s case, we had a his­tory of do­ing what is in the best in­ter­ests of the pub­lic and it was dis­missed.

The article also states that providers search for cap­i­tal to make the tran­si­tion from fee-for-ser­vice to val­ue­based re­im­burse­ment. Pin­na­cleHealth’s tran­si­tion to new pay­ment mod­els has been well un­der­way for sev­eral years. In fact, Pin­na­cleHealth is at the fore­front of im­ple­ment­ing val­ue­based mod­els through risk-based con­tracts. For ex­am­ple, in 2013, Pin­na­cleHealth was ap­proved as a par­tic­i­pant in the Medi­care Shared Sav­ings Pro­gram. The sys­tem also en­tered into re­gional ac­count­able care ar­range­ments with two ma­jor com­mer­cial in­sur­ers in 2013 and 2014. Both agree­ments con­tained sig­nif­i­cant fi­nan­cial in­cen­tives and penal­ties re­lated to qual­ity, out­comes and cost. Pin­na­cleHealth—after in­vest­ing sev­eral mil­lion dol­lars in de­vel­op­ing the in­fra­struc­ture to man­age and co­or­di­nate care— re­ceived in­cen­tive pay­ments di­rectly re­lated to im­proved qual­ity, out­comes and cost man­age­ment.

If the merger be­tween Pin­na­cleHealth and Penn State Her­shey had been ap­proved, our his­tory, ex­pe­ri­ence and ex­per­tise sup­port our po­si­tion that we would have con­tin­ued our tra­di­tion of pro­vid­ing the high­est qual­ity care and the low­est cost on an even larger scale for the ben­e­fit of a broader com­mu­nity.

Michael Young Pres­i­dent and CEO Pin­na­cleHealth Sys­tem

Har­ris­burg, Pa.

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