Birmingham Medical News
November 2015 issue
“We are two long-term competitors who know that healthcare is evolving quickly, and understand that we can do better together than apart,” says Garry Gause about the joint venture finalized in October between Baptist Health System and Brookwood Medical Center. Gause, now CEO of Tenet Healthcare Southern Region covering four states, was CEO of Brookwood for 16 years.
Normally, a merger has an acquirer and a target. Not so with this joint venture. “In this situation,” says Keith Parrott, CEO of the new enterprise and past CEO of Baptist Health System, “we knew Baptist could survive on our own, but to move on with our strategic goals, we needed a partner. We needed integration with a player in the market.” Brookwood, he says, was facing the same scenario. “Neither was for sale. But we could form a new company and go to work toward mutual goals.”
The new health system will be governed equally by both entities. “Tenet (Brookwood’s parent company) has done other joint ventures, but this one is unique because it is a true joint venture,” Gause says. “It’s a 50-50 governance model.” Brookwood and Baptist will each appoint five members to the board who will oversee the company on behalf of the parent entities, both of which bring unique assets to the union.
Baptist brings a large network of physicians and the geographical coverage of four hospitals in four counties – Citizens Baptist Medical Center, Princeton Baptist Medical Center, Shelby Baptist Medical Center, and Walker Baptist Medical Center.
“And Brookwood brings a large medical staff and a geographical position where Baptist didn’t have a lot of strength,” Gause says. He is referring to Brookwood hospital near Mountain Brook plus the new free-standing emergency room along the 280 corridor.
The venture also includes a $250 million capital investment in the new system. Brookwood/Baptist executives are already sorting through the numerous requests submitted from around the system for the capital funds. “We never had the cash flow to make that kind of capital investment alone, but combined we’re able to do that,” Parrott says. “Brookwood built a freestanding emergency department, and now we’ll have the resources to make new investments like that.”
The combination of assets and capital monies greatly advances Brookwood/Baptist’s competitive position with the new Grandview Medical Center on 280. “Grandview has made a big capital investment in one location,” Parrott says. “With this venture, we have the capital to make investments in multiple locations.”
“Hospital competition has been defined by geography,” Gause says. “Now it’s going to be defined by networks, outcomes and transparency, and ultimately by value. Value will matter more than volume. And we’re confident that we will provide the best value system in town.”
“Having the right physician network is frankly more critical than your physical facility,” Parrott says. “People don’t choose hospitals, they choose doctors. If we can build the best physician network that coordinates care and integrates with hospitals, then we’re in a good position to compete in the marketplaces.” The new system, as yet unnamed, will total 68 physician clinics delivering primary and specialty care and about 1,500 affiliated physicians.
As for the rest of the Birmingham healthcare landscape, Gause thinks the merger will move the market faster toward taking risk and comprehensive contracting. For physicians connected with the two systems, the advantage will be “direct contracting with employers, so physicians will be participating in those arrangements as opposed to now where it’s a fee-per-service business,” he says.
The merger, says Parrott, was never about strong-arming payers into increased fees, but rather to create a more integrated network. “That’s what healthcare is missing today. People think they like a lot of choice, but all that creates is a disjointed healthcare delivery experience,” he says. “With this new company, we have the opportunity to look across the board—from convenience, specialty, access, coordination of care standpoint—to deliver a product that will be, over time, higher quality with better customer service and lower cost than if we stayed separate.”
Gause says physicians may not know how good this is for them. They may be concerned the venture puts more power into the hands of fewer entities. “But I’d say this moves it to a more collaborative relationship with a larger system that’s focused on the right things rather than individual hospitals fighting for their loyalty,” he says.
For all healthcare workers within the joining organizations, their career options just expanded. Brookwood staff gain access to four more local hospitals and Baptist employees gain access to a national system for additional hours, career ladders and advancement opportunities.
But neither CEO could speak on specific layoffs or other possible staff changes. “We’ll take our time like any business, and be good stewards of our resources,” Parrott says. “If we see an opportunity to do something more effectively, we’ll go after that.” But they have no plan laid out right now for position eliminations.
The meshing of assets, networks and geographical positioning puts the new system in a position to solve some of the fundamental problems around accessibility, affordability, transparency and coordination of care. “If you ask any person who interacts with the healthcare system on a regular basis, they’ll say it’s too frustrating, too disjointed, and too confusing,” Parrott says. “No hospital on its own can solve that. But five years from now, people who interact with us will say it’s the most coordinated, most convenient, and most affordable services they’ve seen.”