WakeMed Health & Hospitals is joining forces with two other major health systems in North Carolina to reduce operating costs while remaining independent.
WakeMed is teaming up with Wake Forest Baptist Medical Center in Winston-Salem and Vidant Health in Greenville to create a shared services operating company. The company, which hasn’t yet been named, will provide the three health systems with support for new efforts spurred by health care reform as well as a range of services, such as purchasing.
WakeMed CEO Donald Gintzig said the initiative, announced Wednesday, was the culmination of exploratory talks that began in February.
“There was just a real click,” he said. “We are all committed to being independent, but we all realize there are advantages in us using our scale and expertise to partner together.”
Declining revenue and tighter budgets have been pushing health care systems into adopting new ways to operate. Last year WakeMed posted its first operating loss ever, a development that triggered cutbacks, including layoffs, and the departure of then-CEO Bill Atkinson.
Medicare, Medicaid and health insurers are indirectly encouraging cooperative efforts by rewarding health care providers that are efficient, said Adam Linker, a health policy analyst at the N.C. Justice Center.
“Collaboration is sort of the future of health care,” Linker said. “You’re going to see more health systems working together. You’re going to see more hospitals joining health systems. You’ll see more physician groups joining hospitals.”
At the same time, Linker added, the collaboration by the three health systems “could be somewhat of a defensive measure against UNC, Duke, Novant, some of these expanding health systems.”
The joint venture the three systems are forming will start out small, probably with five to seven employees, but its future is open-ended.
“It could be 20 (employees) in a year,” Gintzig said. “It could be 200 in a year.”
How big it ultimately becomes, he added, depends on what opportunities the systems identify to combine capabilities and lower costs.
The initiative won’t have any impact on WakeMed’s staffing levels at the outset, Gintzig said. But the hope is that it will enable the system to avoid adding employees that it would otherwise need going forward.
The location of the joint venture, which the systems hope to have up and running in three months, hasn’t been determined. It could initially be housed in offices at one of the health care systems but “eventually, it will likely be in a stand-alone location,” Gintzig said.
The venture’s employees haven’t yet been selected. Gintzig suspects the staff will be a combination of new hires and employees transferred from the health care systems.
All three systems are in various stages of installing new electronic medical records software from Epic Systems, widely considered the industry leader in hospital IT. Consequently, the venture will look at ways to reduce costs by combining data storage and training efforts.
“It’s heavily intensive training,” Gintzig said. “Do we each need to have our own training?”
It also will focus on joint purchasing to obtain volume discounts, development of standardized treatment protocols based on the best practices of each of the systems, and ways to deliver preventive medicine to patients.
Raleigh-based WakeMed is an 896-bed system with more than 8,300 employees, 1,200 affiliated doctors and more than 255 doctors employed by WakeMed Physician Practices. It’s the smallest of the three health systems.
Vidant Health boasts 1,439 beds while Wake Forest has 1,000 beds.
Gintzig estimated that there are between 25 and 50 shared operating services companies nationwide, some of which have existed for more than a decade.
“There are successes that we have reached out to to learn from,” he said.
The new venture won’t affect WakeMed’s existing partnerships, including its partnership with UNC to train medical students and residents, Gintzig said. In addition, WakeMed also is continuing its previously announced discussions with Duke Medicine about how they could coordinate certain medical services, including oncology and pediatric services.