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  • Health Care Consolidation Continues: Is the Twin Cities Health Care Market a Bellwether for Other Areas?

    Jim Hoyme, PT, MBA

     

    Check out this Minneapolis-St. Paul Business Journal article from June 15, 2015 –   Game on for Sports Medicine

    http://bit.ly/TChcMkt

    Big consolidation of orthopedic practices.

    Are you seeing similar consolidation and service growth of orthopedics, hospitals, and other high profile provider groups in your area?

    The Twin Cities health care delivery market is very progressive and has been for decades. HMOs started here in the late 60s and grew from there. The market really started to consolidate during the Clinton era in the early 1990s when we saw a number of independent hospitals merge into large care systems; care systems acquired primary care clinics; and specialty medical groups started to merge into large practices. That trend has continued over the past 20 plus years here in the Land of 10,000 Lakes, and we are seeing consolidation in various forms in other markets like

    Michigan http://bit.ly/MIConsolidate

    Cleveland, Tampa, Seattle, Phoenix http://bit.ly/MoreConsolidation

    Sioux Falls, SD, a growing city of approximately 170,000 with excellent health care delivery, has 2 very large health systems – powerhouse Sanford Health and Avera MeKennon – that own many of the community hospitals in rural Minnesota, South Dakota, and North Dakota as well as most of the primary care clinics in that area.

    Health care analysts predict that health care integration of various forms – acquisitions, mergers, sales, MSO development – will continue across the country along a continuum. While I am certainly not a health care analyst, I have watched health care reform in many areas quite closely, and very closely here in the upper Midwest. Here are my views of health care reform and a changing market in Minneapolis-St. Paul. Give it a look, and compare it to the trends you see in your market.

    Minneapolis-St. Paul Metro – A Market Consolidating Around Size & Value

    The 8 county metro of Minneapolis-St. Paul is commonly called The Twin Cities (notice the TC on the Minnesota Twins baseball caps). The metropolitan area has 3 million people – similar in population and size to Seattle, Tampa-St. Pete, San Diego, St. Louis, Baltimore and Denver. The Twin Cities are home to the Twins (my personal favorite), Vikings, Timberwolves, Wild, and University of Minnesota Golden Gophers of the Big 10. We also have an active arts and music community; lots of great restaurants and theaters; dozens of micro-breweries; awesome summers; many beautiful lakes; cold winters, and . . . oh yeah . . . a very progressive, consolidating health care market.

    Health Plans – The Big 4

    Let’s look at health plans first. The vast majority of Twin Cities’ residents are covered by 4 commercial health plans:

    3 large health plans –

    • BCBS-Mn
    • HealthPartners, which is vertically integrated and has a local ACO as well
    • Medica, which was formerly owned by United Health Group
    • PreferredOne, which is owned in part by Fairview-University Health Systems. It is a health plan and third party administrator (TPA).

     

    And one small plan –

    • PreferredOne, which is owned in part by Fairview-University Health Systems. It is a health plan and third party administrator (TPA).

     

    Minnesota has a law that requires health insurance companies to be organized in a not-for-profit status, and, thus, giants like Aetna and Cigna have stayed out of this market.

    Few health plans gives them powerful negotiating strength over providers.

    For every ACTION there is a REACTION.

    So what do providers do to regain strength?

    CONSOLIDATE

    ACOs: First . . . Integrated Care Systems . . . Now . . . ACOs: The BIG 4

    In the early 1990s, the largest hospitals acquired the smaller ones and medium sized systems merged to form 5 large care systems. Now there are 4:

    1) Allina Health Systems, which is the largest care system and has hospitals and clinics across the Twin Cities. They have 20+ outpatient physical therapy clinics called Courage Kenny Rehabilitation, and their physicians must keep referrals in house.

    2) Fairview-University Health Systems. Fairview health systems combined with The University of Minnesota Hospitals and Clinics to form Fairview-University. This powerhouse also has 30+ outpatient physical therapy clinics called the Institute for Athletic Medicine, which are very well organized with quality clinics and excellent leadership. Fairview-University clinics are primarily located in Minneapolis and its suburbs, and physicians must keep therapy referrals within their system.

    3) HealthPartners-Park Nicollet. HealthPartners is the only health system vertically integrated with a health plan. They are perfectly aligned for an ACO structure. HP primarily has a St. Paul presence. They have 3 outpatient physical therapy clinics, and physicians can refer to other clinics. Park Nicollet is a Minneapolis based system. These hospitals and clinics are located in Minneapolis suburbs. They have 8 therapy clinics. Why do you think NP and Park Nicollet merged?? To cover the entire Twin Cities. More Power. At this time, while HP physicians can refer outside, Park Nicollet providers cannot.

    4) Health East Care System. Health East is a St. Paul based system with hospitals and clinics located only on the east side of the TCs. They have 4 outpatient physical therapy clinics, and their physicians must refer only to Health East therapy clinics.

    Will there be another merger or acquisition soon?? Will Mayo or Sanford Health enter the Twin Cities with a stronger presence? Time will tell.

    All 4 Twin Cities care systems are now organized as ACOs. As you know, ACOs have 2 primary responsibilities

      • Deliver measurable quality care across a continuum of providers
      • Manage the cost of that care

     

    in order to share financial risk with the government and and commercial plans.

    But we can’t forget the docs – they put people in our hospitals !!!!

     

    Primary Care – The Link to Real Control . . . Real Power

    Primary Care physicians control most of referrals and services. You control primary care, you control health care delivery. Shortly after hospitals began to merge, these large systems began to acquire primary care clinics – their physicians and other providers. 87% of the primary care physicians in the Twin Cities are employed by ACOs.

    Hey … What happened to mom & pop family practice?”

    Dead and buried. They don’t have enough money and need the hospitals for support and strength.

    Let’s see. I’m working long hours for 1/4 of what the specialists makes… Hospital wants my practice???  Get a decent salary. Fewer hours. Less call. An extra week of vacation. Sell the practice. Work for The Man. I guess I can do that. Actually . . . it’s a No Brainer.”

    Now the care systems . . . oh yeah . . . ACOs . . . have tremendous power to negotiate against the powerful health plans.

    The Clash of the Titans

    Powerhouse vs Powerhouse. Who will win the battle? Well, the market is changing. They are starting to work more closely together. Neither wants to hit the front page of the Minneapolis Star Tribune or St. Paul Pioneer Press or be the lead story on the 10:00 PM news because of a contractual impasse. It affects too many of the readers and watchers.

    ‘Locked out of the hospital’.

    Really Bad News for the ‘evil health plans’, and potentially Bad News for the ‘big bad corporate hospitals’. Neither likes bad press. (NOTE: To be clear – I DON’T think the local health plans are evil or the local hospitals are bad. But some people do.)

    Solution: ACO structure. ObamaCare is pushing ACO formation, but so are the Titans. Shared risk – collaborate on models that benefit both – shared savings; bundled payments; value-based models. These can all potentially benefit both the ACO providers and the Health Insurance payors. Check out these short articles:

    • BCBS moving to value based models of care and spending $65 Billion to do so

    http://bit.ly/BCBSPayVALUE                        http://bit.ly/BCBS65B

    • Providers are moving to value based care models

    http://bit.ly/mreVALUE

     

    Hey! How About the Independents?

    We want some of that power, too!!”

     

    So how about independent medical groups?  Let’s focus on orthopedics and physical therapy. The Twin Cities have gone from 8 -10 orthopedic practices 10 yrs ago to 3 VERY large orthopedic mega practices

    • Twin Cities Ortho
    • Summit Ortho
    • Tria
    • Mayo Clinics Sports Medicine that isn’t large yet, but from financial and branding perspective – very powerful.

     

    Plus newly arrived:

    • Mayo Clinics Sports Medicine that isn’t large yet, but from financial and branding perspective – very powerful.

     

    OK- What happened to 3-5 ortho doc practices?” 

    They are alsoDead and flat out gone!’  They had no negotiating strength and low contracts.

    How did this mega consolidation of orthopedic practices occur? (actually – all specialist practices)

    First the large ortho practices negotiated best rates, and then they lured the orthopedists from small practices, who got paid less, to come and join them.

    “Come with us and make more money.”

    “Hmmm . . . Why not make more money?”  

    The small ortho groups folded – docs went to big practices.

    “So did the large practices buy the small ones??”

    No need to in most cases. They just grabbed the docs and said we will give you a pay raise … Plus less nights and weekends of call. Sweet deal. Most closed their doors.

    The large specialty practices now have greater negotiating power because of their size. But like the ACOs, their leaders know they must be willing to deliver value, share financial risk.

    Bundling.

    Independent physical therapists? While many have decided to go it alone’ . . . ‘stay the course’ . . . ‘business as usual’ . . . and some decided it was ‘time to sell’ . . . Therapy Partners has integrated independent practices under a single Tax ID Number (TIN), attained good contracts with health plans, engaged in value-based models, centralized billing/payment processes, consolidated some admin services, and built ACO relationships.

    Best of Both Worlds. As an MSO, TPI brings

    • The practices integrated strength of size under a single TIN
    • Value to the powerful decision makers in the market
    • The ability for the practice owners to maintain independent ownership

     

    Integration has several formats, but regardless of how independents consolidate, the teams of providers must bring tangible value as well as size.

    But Who Has the REAL Power?

    While the independents gain strength as they grow and deliver value based models, all specialists will have to create relationships with and deliver risk sharing value to the ACOs, who own financial risk with the health plans.

    ACOs are ACCOUNTABLE for care, service and cost. The Triple Aim.

    They will look for providers who can help their patients/enrollees stay as healthy as possible, keep them engaged in their health, and reduce the total cost of care.

    Triple Aim.

    Is there room for independent physical therapy practices?

    Absolutely.

    If you bring Size AND Value. Real integration with simplicity in negotiating contracts, processing payments; predictability in outcomes; and convenience in access to care.

    So Is the Twin Cities Unique?

    Money is money. Risk is risk. Power is power. Money, Risk, and Power are incentives to change.

    Consolidate. Share Financial Risk.

    So why is Minneapolis any different than Seattle or Dallas or Charlotte?  Little Rock or Sacramento or Madison? Other than the sports teams and the weather – nothing.

    The Twin Cities is ahead of the health care consolidation curve but all markets will go down a similar path at some point. Why wouldn’t they?

    Money. Risk. Power.

    We must connect with and bring value to the powerful decision makers.

    Opportunity.

    – Jim

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