Geisinger, Evangelical test different partnership model
A rural Union County hospital figured its best bargaining chip was its financial stability.
And it has parlayed that chip into a partnership with one of the states’ leading health systems.
The deal is designed to give Evangelical the benefits of partnering with a hospital system without entering into a full-blown merger.
Community hospitals are still an entry point to care for many Pennsylvanians but they can be more expensive for patients if they aren’t connected to a larger system that can help bring down prices.
And many rural hospitals have been struggling financially. In 2017, 56 percent of Pennsylvania’s 42 rural hospitals were operating at a loss, according to data from the Chartis Center for Rural Health in Illinois.
Evangelical, which has 132 overnight patient beds and employs over 1,800 people, was not among them. According to the Pennsylvania Health Care Cost Containment Council, Evangelical had a 15.3 percent operating margin in 2017, making a gain of $15 on every $100 in revenue.
But as hospitals around it consolidate, Evangelical’s leaders knew they had to partner with a health plan, according to Kendra Aucker, Evangelical’s president and CEO. Evangelical competes with hospitals in the UPMC and Geisinger networks – two networks that give better coverage to patients enrolled in their health plans if they go to their hospitals. Those hospitals are known as tier one in an insurance plan.
Patients with Geisinger Health Plan could go to Evangelical. But they would pay more out of pocket there than if they went to a hospital that was coupled with the Geisinger plan.
Under the deal with Geisinger, Evangelical is now a tier one provider on the Geisinger Health Plan. That means patients in the plan now get the same coverage at Evangelical as they would if they went to a Geisinger hospital.
“It’s important for us to have a solid pay strategy so we aren’t locked out of the market,” Aucker said.
As a part of the agreement, both organizations pledged to invest $265 million in the region over the next five years. It includes a $72 million expansion to Evangelical hospital that will add 112,000 square feet allow the hospital to convert its current rooms to private rooms without changing the number of beds overalll.
Aucker said other details of the investment are still up for discussion but both Geisinger and Evangelical are discussing what new services and programs can be brought to the area.
Evangelical and Geisinger also will begin putting Evangelical’s electronic health records into Geisinger’s system.
Negotiations for the agreement began in October. Aucker said Evangelical’s leaders wanted the hospital to stay independent. While Geisinger will be naming six members of Evangelical’s board, she said they will be members of the local community.
Community hospitals emphasize local leaders and physicians because they are more likely to have a stake in a community’s health, according to Patrick Plummer, professor of business and supply chain management at Penn State Mont Alto.
Evangelical is 17 miles from the larger Danville-based Geisinger Medical Center, which employs 9,900 people and has 571 beds. Plummer said despite that proximity, Evangelical has an upper hand as an access point to health care for both Lewisburg residents and rural residents outside of the borough’s limits.
“As long as you are able to generate a profit and make the investments necessary to stay on the leading edge to keep your community healthy, there is no reason to merge,” Plummer said.
Geisinger has other partnerships with hospitals farther from its medical center that don’t directly compete with it. Holy Spirit Health System in Camp Hill affiliated with Geisinger in 2014 but Holy Spirit’s needs differed from Evangelical’s, said Lynn Miller, executive vice president of Geisinger.
“Holy Spirit was looking for a partnership that was tighter. They needed a lot more investment at the time (such as) clinical programing, the development of new facilities and health-related IT systems,” Miller said.
Holy Spirit, in East Pennsboro Township, Cumberland County, competes with UPMC Pinnacle Carlisle and UPMC Pinnacle West Shore. Another hospital is slated to open in Cumberland in 2021: Penn State Health’s Hampden Medical Center.
According to the Pennsylvania Health Care Cost Containment Council, in 2017, Holy Spirit had a negative operating margin of six percent - meaning that for every $100 in revenue the hospital made, it lost $6.
Holy Spirit’s net loss is a symptom of the competition surrounding it, said Plummer. Evangelical is in a stronger position.
“It is a situation where it is almost ideal for a hospital to be able to maintain its community status,” Plummer said of Evangelical.