UAMS, St. Vincent tie-up dead

The University of Arkansas for Medical Sciences has ended discussions with St. Vincent Health System about forming a “strategic alliance” designed to cut costs by sharing some business operations and combining some clinical services, UAMS Chancellor Dr. Dan Rahn said Friday.

Throughout the partnership negotiations, which started in August 2012 and ended earlier this week, leaders of the two hospital systems exchanged several rounds of proposals and counter proposals that showed disagreement about how the systems should integrate and to what degree they should combine clinical services and management. Discussions were complicated by political, financial, statutory and regulatory concerns.

“Despite the good faith efforts of everyone involved, neither entity has been able to define a pathway that meets the goals of both institutions,” the two hospital systems said in a joint statement released by UAMS.

Through the partnership, initially proposed by St. Vincent, the two hospital systems hoped to form a “clinically integrated network.” Such networks, increasingly common since the passage of the federal Patient Protection and Affordable Care Act, would have allowed them to join with other health-care providers around the state to reduce costs and improve treatment results by eliminating unnecessary tests and procedures and by bolstering coordination between doctors, leaders said.

That network would have been built on the foundation of a jointly owned and operated entity that would have managed shared operations at both Little Rock-based hospitals. The two also discussed a research and academic agreement under which UAMS students and medical residents would have trained in St. Vincent facilities and some St. Vincent doctors would have joined the UAMS faculty.

Rahn and St. Vincent President and Chief Executive Officer Peter Banko said they were motivated to explore a partnership by growing costs, new health-care laws, new Medicaid payment models and the growing burden of charity and uncompensated care.

Public and private Arkansas hospitals have started adapting to ongoing transitions in the state’s Medicaid program. Rather than paying a fee for each service performed, as it has done in the past, Arkansas Medicaid plans to reimburse providers for “treatment episodes,” bundling all of the costs associated with a particular health event, such as a heart attack, into one payment. This model favors collaboration among providers, Rahn has said.

In addition, hospitals expect to see more patients as the Affordable Care Act extends care to as many as half a million currently uninsured Arkansans when it is fully implemented in 2014.

But the partnership discussions raised concerns from some vocal community members and state lawmakers about the differing missions and policies of UAMS, the state’s largest public employer and only medical school, and St. Vincent, a private hospital system operated by Catholic Health Initiatives, a Colorado-based organization that has created similar partnerships with hospitals in other parts of the country.

In their proposals, the Little Rock hospitals had not finalized how the board of the new organization would have honored the University of Arkansas board of trustees’ constitutional obligation to oversee UAMS’ operations.

Early in negotiations, officials publicly committed to keep clinical treatment and research related to contraception and women’s health matters separate to avoid any conflicts. Catholic hospitals operate under a set of doctrine-based directives that restrict certain procedures, such as tubal ligation.

Despite a commitment to develop a governance model that addressed those concerns, leaders of the two hospital systems could not agree on some key points of the partnership, which caused them to end negotiations.

“It was a mutual decision that we made earlier this week,” UAMS spokesman Leslie Taylor said.

Banko said UAMS made the decision to end talks. He would not point to a specific area of disagreement that led to the decision.

“We at St. Vincent are disappointed that it’s come to this. … We thought that was a good thing for our community, but life goes on,” he said in an interview.

Banko said St. Vincent would now focus on further developing its existing physician network and that the hospital is open to further discussions in the future.

“We would love the opportunity to revisit talks with UAMS when the time is right for them,” he said.

Estimates varied about how much the hospitals could save through a partnership. Banko said St. Vincent estimated a combined savings of $80 million. Catholic Health Initiatives was willing to invest $200 million in UAMS programs as part of the agreement, he said.

A study prepared by Deloitte Consultants and commissioned by both hospitals estimated that the two hospitals could save a combined $38 million to $63 million annually, assuming “very high degree of integration that may or may not represent what the parties intend.” That cost estimate assumed merged services in the areas of cancer and cardiac care.

Draft proposals obtained under the Arkansas Freedom of Information Act in recent months have shown differences in the hospitals’ approach to the proposal.

One draft created by St. Vincent called for a third-party management organization that would have controlled all clinical services, not just cancer and cardiac treatments, as the two hospitals had previously discussed.

Under the withdrawn proposal, St. Vincent would have owned a majority of that management organization, which would have been governed by a “transitional board” led by Rahn with members appointed by both hospitals. The Catholic hospital system would have managed all facilities - hospitals and physician clinics alike - involved in the partnership.

UAMS suggested a less extensive partnership. Its most recent proposal suggested contracting with St. Vincent for some support services, such as revenue management and purchasing, and jointly operating a small number of clinical services through independent agreements.

Taylor said UAMS will be open to partnering with hospitals and clinics around the state but does not expect to revisit similar talks with St. Vincent in the near future.

“We’ve said all along that we need to find other ways to work with other providers,” she said.