If the essence of deal-making is putting your money where your mouth is, a new agreement between Pennsylvania healthcare giants fit the description. They’ve certainly bitten off a mouthful.
Health organizations, Penn State Health and Highmark Health, have agreed to make a collective investment of more than $1 billion. That is a pretty big number to swallow, even for two large organizations, though it very well may take even more to develop the kind of network they have in mind.
The two are building out what they describe as a “community-based healthcare network,” which they’re designing to foster collaboration with community doctors and keep care local across its service areas. Makes sense, though the initial press release doesn’t do much to explain how the two are going to make that happen.
The agreement between Penn State and Highmark includes efforts to support population health, the next step in accepting value-based payment. The investors’ plans include the development of population health management capabilities and the use of analytics to manage chronic conditions. Again, pretty much to be expected these days, though their goals are more likely to actually be met given the money being thrown at the problem.
That being said, one possible aspect of interest to this deal is its inclusion of a regionally-focused academic medical center. Penn State plans to focus its plans around teaching hospital Milton S. Hershey Medical Center, a 548-bed hospital affiliated with more than 1,100 clinicians. In my experience, too few agreements take enough advantage of hospital skills in their zeal to spread their arms around large areas, so involving the Medical Center might offer extra benefits to the agreement.
Highmark Health, for its part, is an ACO which encompasses healthcare business serving almost 50 million consumers cutting across all 50 states. Clearly, an ACO with national reach has every reason in the world to make this kind of investment.
I don’t know what the demographics of the Penn State market are, but one can assume a few things about them, given the the big bucks the pair are throwing at the deal:
- That there’s a lot of well-insured consumers in the region, which will help pay for a return on the huge investment the players are making
- That community doctors are substantially independent, but the two allies are hoping to buy a bunch of practices and solidify their network
- That prospective participants in the network are lacking the IT tools they need to make value-based schemes work, which is why, in part, the two players need to spend so heavily
I know that ACOs and healthcare systems are already striking deals like this one. If you’re part of a health system hoping to survive the next generation of reimbursement, big budgets are necessary, as are new strategies better adapted to value-based reimbursement.
Still, this is a pretty large deal by just about any measure. If it works out, we might end up with new benchmarks for building better-distributed healthcare networks.