Hospitals must identify affiliation model that works for them

Hospital affiliation is a growing reality within the healthcare industry as organizations fight to remain financially strong and produce quality outcomes. However, there are many affiliation approaches, and hospitals must identify the model that works best for their respective facilities, according to an article in Hospitals & Health Networks.

After a hospital or health system identifies the key reason for affiliation and defines goals for the move, they can find the affiliation partner that meets organizational needs and values, wrote author Jonathan Spees, a senior vice president at The Camden Group.

For now, outright sales and mergers are the most prevalent affiliation transaction. Spees calls them "change-in-control" transactions, which are based on the need for capital and can help facilities improve infrastructure, recruit new physicians and expand clinical services. Full integration also allows hospitals to tap into corporate expertise in billing, resources, quality, outcomes and population health, which can lower costs in the long run, according to the article.

However, hospitals can affiliate without merging using joint ventures, which allow nonprofit organizations to secure capital while maintaining some control over operations. In most cases the partner organization, usually a for-profit entity, owns 80 percent of interest and runs day-to-day operations, while the nonprofit entity is in charge of clinical and physician development.

Clinically integrated networks, another affiliation option found in the medical home model, support effective care coordination, and allow the partners to share the cost of population health management and infrastructure, Spees wrote. They also allow for independence while sharing clinical expertise and IT-related costs.

Meanwhile, joint operating agreements let the partners retain separate identities by keeping assets and governance separate, while integrating operations and financial results. This model captures economy of scale, improves coordination and reduces redundancies in the system, Spees wrote.

Hospitals and health systems must identify the best affiliation practice for them to sustain the organization's mission, vision and values, according to Spees. "The optimal transaction structure will be the one that best manages this trade-off between maintaining the attributes of independence most important to stakeholders and securing the financial strength and other benefits that joining a larger organization can provide," he wrote.

To learn more:
- read the article

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