By Matt Fisher, General Counsel, Carium
Twitter: @matt_r_fisher
Twitter: @cariumcares
Host of Healthcare de Jure – #HCdeJure
The big news for the healthcare industry in the last month of April was the announced merger of Kaiser Permanente and Geisinger through the creation of a new non-profit parent entity ostensibly focused on value based care. The merger, which is still only announced, will bring together two prominent players in the integrated network space.
Why This Deal?
One perspective is that merger is arguably a non-profit answer to the consolidation being driven by Optum, the care delivery, analytics, and more side of the UnitedHealth structure. The non-profit entity creates the specter of an entity that will operate for the betterment of the community. That is certainly an open question given all of the debate as to whether non-profit entities are anything by for-profit entities with a specific (unfair?) advantage.
If not an answer to Optum, the merger could be a counter to the recent merger of Atrium Health and Advocate Aurora, which could be considered a more analogous transaction. Atrium and Advocate are two big hospitals systems attempting to create what can be seen as a bit more of a national presence as opposed to solely regional.
Kaiser and Geisinger are in a fairly similar boat as both combine multiple hospital facilities or campuses along with physician groups. The vertical integration of services creates the opportunity to drive better alignment and consistency.
Where Kaiser and Geisinger start swinging back more to the Optum and UnitedHealth model is the presence of health plans within the corporate structure of both organizations. Controlling not just the delivery of care, but the purse strings makes a significant difference. When payment and care delivery are on the same page, theoretically novel approaches can be put into place. That is a bit of the premise that Kaiser and Geisinger have operated from.
The Drive to Value
The last part of the speculation around the merger is what offers the biggest opportunity. Saying that enhancing value is an intended aim is not speculative as it was a core part of the announcement. Value based care has been a buzzword throughout healthcare for a number of years now, but progress has been slow. For Kaiser and Geisinger though, value is not just a goal. Value have been core components of both organizations for a number of years and both have participated in various government and commercial programs on that front.
The question about future success or growth with value may turn on which value model will be pursued? No two organizations (or event potentially two facilities within the same organization) will operate exactly the same, despite outward claims to the contrary. When two established and entrenched entities come together, the ability to integrate and align becomes that much more difficult.
While integration is difficult it is not impossible. However, it takes a significant amount of time, compromise, and ceding of control. All of those factors come with many potential stumbling blocks. Negotiating changes in care delivery structures, management, and control, among many other aspects all take a long time. When looking at a merger, the time to drive alignment is measured in years (decades for healthcare?) and not anything that occurs overnight.
If change cannot and will not occur overnight, the incremental steps are key to watch. Along with the incremental steps, it is informative to glean any insights about infrastructure changes or developments along with what new partners or solutions come in. Understanding who or what the merged organizations seek to work with can provide an indirect view into how the organizations intend or are trying to operate.
Aside from those more nuts and bolts items, the other question will be what value goals are pursued. How will the organizations define value based care and what care delivery activities will need to be developed or put into place to facilitate those goals. If true change on the value front is desired, it will very likely be models that iterate upon some of the currently popular ones, which are bundled payments and accountable care organizations.
What Remain to Be Done?
The answer to that question is a lot. While there may be some legal documents in the background, there is likely no definitive final agreement yet or any of the needed approvals. Will a government agency (whether federal or state) seek to challenge? Could others in the industry seek to challenge on behalf of an agency? What concessions will be obtained to obtain approvals? Who will lead the organizations? These are just some of the multitude of questions facing Kaiser and Geisinger. It will require a lot of work and time to get through all of those issues.
Taking a bit of a cynical (or legally realistic?) view, the proposed structure also could include an arguably easier way to get out. The announcement noted that Geisinger would go into the newly created entity that is more of a management entity will become the parent for Geisinger. That means unwinding if plans do not work out could be easier than if one entity merged into the other. While no one wants to contemplate things not working out, it is always something that should be considered upfront. Maybe that’s the lawyer hat speaking, but preparing for bad outcomes is necessary even before entering a honeymoon phase of completing a deal because it can avoid unnecessary fights later on.
What to Watch
The key to watch going forward will be how quickly the Kaiser and Geisinger deal actually closes and then what work is done to integrate as well as iterate on how value based care is done. The announcement will certainly shake-up the healthcare industry in some fashion, the exact way will remain to be seen.
This article was originally published on The Pulse blog and is republished here with permission.