Mergers part of health care trend

Feb. 06--The potential merger of MidDakota Clinic and Sanford Health is being seen as part of a national trend of integration in health care.

Brad Gibbens, deputy director of the Center for Rural Health at the University of North Dakota School of Medicine and Health Sciences, said many have seen the effects the Affordable Care Act has had on insurance coverage but fewer are familiar with the effects it has had on reform of the country's health system.

"That's significant," he said.

The biggest change is in how providers are paid -- a switch to results-based pay versus volume-based pay. What this means is hospitals are reimbursed more when patients are successfully treated upon their first visit and don't have to be readmitted after being sent home.

"There's more emphasis on what's needed to make the patient healthier," said Gibbens, adding that providers get paid more for better health outcomes.

Due to this focus on lowering costs and increasing quality of care, the integration and merging of health care providers has been accelerated under the ACA.

"So for Sanford to want to pull in more providers is not surprising," Gibbens said. "On the surface, it sounds like it makes sense."

Sanford Health said no new updates are available on its talks of acquiring MidDakota Clinic and declined to comment for this story.

Following the two heads are better than one school of thought, having those physicians on its side is one way Sanford could improve on the payments it receives for service. The integration of Sanford with MidDakota also will likely pull in the strengths of the clinic and the hospital, taking the best of both systems and leading to an overall improvement.

"We no longer have the luxury of being a lone wolf," Gibbens said. "There's security in numbers in a volatile health care market."

As efforts are made to replace the ACA, Gibbens said effects will depend on whether lawmakers retain the merit-based payment system.

Health care workforce availability has been another long-standing problem that Sanford could address through acquisition. Because MidDakota is multidisciplinary, employing more than 90 practitioners, it expands the base of doctors Sanford can draw from without having to recruit from other parts of the country.

The benefit for MidDakota doctors would be the ability to cut costs by taking advantage of the administrative capacity at Sanford, allowing the doctors to turn over the bureaucratic part of the business and focus on providing care.

Job losses

CHI St. Alexius did some integrating of its own in 2014, when it joined with the Catholic Health Initiatives system. At that time, Jeffrey Drop, CHI's senior vice president and division executive officer in Fargo, said the affiliation gave St. Alexius access to resources and doctors at other CHI locations.

"That (sharing resources) is what this is all about," he said.

Kevin Lofton, CEO of CHI, said the partnership allowed the organizations to operate "more efficiently in light of health care reform."

"Health care delivery is in a state of transition and change," St. Alexius President Gary Miller said in a statement. "Our new affiliation with CHI will continue our sponsorship and mission while providing the opportunity to deal with the new challenges in a collaborative and coordinated way with a system that shares the same values."

"It's one gigantic chess game," said Gibbens, pointing out that integration is just one part of the strategy.

Because of St. Alexius' own integration, Gibbens estimates the merger between MidDakota and Sanford does not pose as much of a threat to its competitor as it could have five or six years ago. He expects the hospital's leaders to watch the deal but not get overly nervous.

If a Sanford and MidDakota merger does go through, Gibbens said people should be able to expect the same level of care. And he doesn't expect it to have any impact on the fees, though it could make Sanford the sole provider for certain specialities, such as dermatology and obstetrics and gynecology.

Gibbens said, unlike typical economic models, where competition helps drive down price, "a lot of times, in health care, competition actually fuels more visits and more admissions," increasing the cost of health care, which is the opposite of what the ACA incentivizes.

Reach Jessica Holdman at 701-250-8261 or jessica.holdman@bismarcktribune.com

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