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Working with co-owned hospitals: 3 things you need to know

June 25, 2018

    Working with just one hospital can be difficult—and working with a hospital co-owned and managed by two independent entities could be an even bigger headache.

    Follow these 3 key steps to building your own VAC strategy

    From the perspective of a cash-strapped hospital system, the co-ownership model may help the system expand its network while remaining independent. And while the model is not without its challenges, vendors ultimately don't have too much to worry about: You may need to slightly tweak your usual strategies, but you shouldn't expect this new ownership model to drastically change the way you do business.

    An emerging hospital ownership model

    In March, St. Luke's University Health and Geisinger announced plans to build and co-own a new 80-bed hospital in Pennsylvania. The two health systems plan to split construction costs and governance, and both will provide staff for the hospital. St. Luke's will manage the new hospital's construction.

    St. Luke's and Geisinger turned to the co-ownership model in part because they can improve patient care through their joint expertise and capital. There are also strategic advantages to remaining independent, such as retaining brand recognition. And they're not the only ones exploring the advantages of this model: Tenet and Baylor Scott & White also recently announced that they will co-own five Texas hospitals. However, unlike St. Luke's and Geisinger's joint branding, the Texas hospitals will all bear the Baylor Scott & White brand.

    Amid the flurry of hospital mergers and acquisitions (M&A) activity, this co-ownership model stands out as especially collaborative. However, other, previous forays into co-ownership have been rather short-lived. Consequently, we can't say for sure if this relatively untested model will be a success, or if the push of M&A will force this model out—but this is a trend that is definitely worth keeping an eye on.

    3 tips to manage relationships with co-owned hospitals

    One of the challenges that co-owned hospitals face is determining who holds the decision-making power. Of course, this challenge also has implications for suppliers and service firms as well—how can you sell to a hospital when it's unclear who's in charge?

    For starters, don't think of these co-owned hospitals as an entirely new animal. Try treating a co-owned hospital like a newly acquired hospital or newly integrated system. Sure, there will be operational kinks to work out—but don't worry about completely changing your sales strategies. Here are three tips that may be useful in dealing with these entities:

    1. Keep your ear to the ground. As with any hospital provider-supplier relationship strategy, you need to hit the pavement to understand what's being decided, who's making decisions, and how they're making them. Particularly with these co-owned entities, there is still considerable variation in their operations as they work out the operational intricacies of this model; do your homework before going into a meeting.

    2. Understand the goals of both co-owning hospitals. The value analysis committee (VAC) for a co-owned hospital may include members from only one organization, or it may include both. Either way, VACs in a co-owned hospital will likely consider viewpoints from both organizations, so it's best to understand where both owners are coming from. You may be able to leverage existing relationships—but don't assume that your good relationship with one organization will win you favor with the co-owned hospital.

    3. Stick with what you know, for now. VACs tend to rely heavily on input from supply chain, so if you're at a loss for where to start, supply chain is a valuable partner.

    Ultimately, the future of co-owned hospitals remains to be seen. However, if these recent attempts prove successful, we may see more and more hospitals going this route, as health systems seek to grow their networks while maintaining their cherished identities.

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