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The ink was barely dry on the news release and the seats still warm from the town hall meetings announcing an unprecedented alliance between the Southeast's premier academic health center and the largest hospital chain in the country when the calls began pouring into administrative offices of both organizations.
 
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 ere Emory physicians going to be required to go by the busload to the eight Columbia/HCA hospitals that ring metropolitan Atlanta?
And from the community physicians at Columbia hospitals involved in the deal: Were busloads of Emory physicians going to arrive at their doorsteps and threaten their patient bases? There were other questions. Would aligning with a for-profit organization jeopardize our academic mission? Would the partnership put Emory at risk in any ongoing litigation? Would the alliance affect Emory's reputation for quality? Did this set up Emory to be swallowed by a bigger fish? Would the community hospitals lose connections to their communities? Such concerns were not unexpected as Emory embarked on what has been called one of the most significant ventures in its history - an agreement to bring eight C/HCA hospitals and five surgery centers together with Emory Healthcare. But even more plentiful than the fears of the unknown that accompany any change are the opportunities for shaping the most comprehensive health care system in the area: one that will provide more access to high-quality health care to more people throughout Atlanta - whatever their health care needs. The new agreement, announced last November after months of behind-the-scenes discussions and negotiations, was signed early this year. The hardest part lies ahead though: hammering out the details and fulfilling the potential of this new model of academic-corporate partnership. |
LEADERS OF THE PACT
Under the structure of a limited liability company (LLC), a partnership similar to that of a corporation protects individual parties from liability. The eight C/HCA hospitals and five surgery centers in the new EHCA, LLC will be overseen by a joint board governed by Emory Healthcare and Columbia/HCA, with equal representation from both organizations.
Michael Johns John Fox John Henry Rein Saral John Temple
Frank DeMarco Steve Woodford Thomas Gilbert Courtney Reece Jay Grinney |
 ne certainty is that this alliance is very different from the one discussed in 1994, when Emory considered sale of Crawford Long Hospital to C/HCA and a minority interest in C/HCA's Atlanta-area community hospitals. Emory broke off talks then, citing, among other things, cultural differences between the two organizations. In the interval, another brief round of talks fizzled, but Emory continued to follow closely the evolution of the giant company.
Two years ago, after close scrutiny by the federal government, C/HCA changed leadership and has since returned to its roots to do what it does best: hospital management. Emory leaders say that Columbia /HCA is a much stronger organization now than four years ago and dramatically different from the growth company that had aggressively acquired a potpourri of health care businesses over the years. Since reorganizing under a new CEO, Thomas Frist (the founder of HCA), the company has divested many of its peripheral assets to concentrate on its hospital business. Today, the company has moved from a top-down-control style of management to one that's more collaborative. Under the new agreement, Emory and C/HCA have created a limited liability company known as the EHCA, LLC to oversee the eight Atlanta area hospitals and five surgery centers owned by Columbia. Unlike C/HCA arrangements with other academic medical centers, the Emory agreement is structured as an equal partnership. That phrase, "equal partnership," is key to the new venture. As Michael Johns, director of the Woodruff Health Sciences Center and chair of the new LLC, notes, "We didn't put out a nickel, and they didn't acquire anything of ours: not a hospital, physician group, or anything else. In other words, we didn't sell a hospital; we didn't sell our soul. Instead, what we both acquired was a partner." In fact, the Emory-C/HCA pact represents the first time a nonprofit, academic health center and a for-profit, publicly traded company have created such an equal partnership. The LLC is jointly governed by Emory Healthcare and C/HCA Healthcare Corporation through the 10-member EHCA, LLC board, with equal representation from both organizations. Through the LLC, Emory is responsible for clinical management activities in the 13 facilities, and C/HCA is responsible for managing those facilities' day-to-day operations. Many activities at the eight hospitals eventually will be offered in an integrated manner with Emory Healthcare, including managed care contracting, marketing, physician referral, contracted services, credentialing, and strategic planning. All eight hospitals are JCAHO accredited, one (Eastside Medical Center) with commendation, and 92% of the physicians practicing in those hospitals are board eligible or board certified. At least half of the community physicians are Emory medical school graduates, and many refer patients to Emory. Eventually, signage and material will reflect the addition of Emory and Emory Healthcare to the local name. Under the agreement, C/HCA will continue to own the buildings and other physical assets of the 13 facilities. The LLC will lease these facilities for the duration of the agreement and will manage operations. The partners will share profits based on a formula specified in the agreement. None of the existing Emory Healthcare facilities or other hospitals or facilities owned by Columbia/HCA elsewhere in Georgia is included in the arrangement. C/HCA retains complete interest and control of its facilities outside Atlanta. Emory Healthcare retains complete interest and control of its own clinics and hospitals. The agreement greatly broadens the community's access to care under the Emory umbrella. The 1,277 licensed beds in these eight inpatient, acute care facilities almost doubles the size of the Emory Healthcare hospital network, which numbered 1,362 licensed beds prior to the agreement. |
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 here were many reasons for Emory to ally itself with C/HCA.
The partnership fits into the Woodruff Health Sciences Center's 1997 clinical strategic plan for Emory Healthcare to become the leading health care delivery system in Atlanta. After examining market realities - managed care, competition, declining federal and state reimbursement, and a projected $105 million shortfall over the next five years - it became clear that Emory Healthcare could no longer go it alone in the Atlanta health care market. The plan envisioned an Emory Healthcare that was geographically dispersed and economically aligned. To do that, Emory needed to identify local hospital partners that would complement Emory Hospitals. The new alliance fits the bill.
As Johns pointed out during the town hall meetings, "If you look at Atlanta as a doughnut, then Emory covers the hole pretty well. Columbia/CHA covers the rest of it," with community hospitals in suburban areas that ring the city (see map). Emory has 9% of the health care market and Columbia 11%, as compared with Promina's 33%. Now with 20% of the patient market, the new alliance better positions the LLC to compete for managed care contracts. The Emory-C/HCA alliance aims to increase Emory's market share by 50% within five years. Market share is particularly critical to the long-term health of Emory's clinical enterprise and ultimately, teaching and research. Emory joins a nationwide trend to align physicians, hospitals, and other providers into large systems which, through increased efficiencies and economies of scale, can provide comprehensive quality care at lower costs. Employers help determine where their workers will get health care, Johns said during the town hall presentation. Employers look at provider lists, and "if you have essential hospital services, that provides leverage in the contracting process for the best price, so scale is important. It's important that we establish ties with acute care facilities, and we believe this offers the best hope for Emory to grow." Cardiologist Wayne Alexander, who sat on the physician committee that helped evaluate and negotiate the partnership, agrees. During the town hall meeting he observed, "I've devoted my life to academic medicine, but the most frightening alternative in the environment before us is to continue to operate with only 9% of the market." After examining the data, the strategic planning committee of some 200 physicians and managers concluded the status quo is not good if Emory wants to preserve its three-part mission. "It's not about making one piece more important than the next, but without patients, we cannot teach," says Barbara Schroeder, director of strategic planning for Emory Healthcare. "Without clinical revenues, we can't help cross-subsidize research and teaching. From the bench to the bedside, we need patients and a strong clinical base. To have an economically aligned, geographically dispersed health care system, we need multispecialty clinics and hospitals in the north, south, east, and west, and we need to provide a complete continuum of care. That's why Wesley Woods is part of us for geriatrics, that's why we have our primary care network, and that's why we now have access to community hospitals that ring the metropolitan area." |
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hile Emory continues to talk with other health care organizations throughout Atlanta regarding possible future alliances, the issue of improved patient access made the C/HCA marriage particularly attractive. Patients prefer to stay close to home for most inpatient and outpatient procedures, and many Emory Clinic patients often choose to go to non-Emory affiliated hospitals and surgery centers in Atlanta's suburbs and exurbs. The dollars stay with unaffiliated facilities rather than flowing back into the Emory system.
Obstetrics and primary care are prime examples. In fact, where OB and primary care are delivered in metro Atlanta was one of the big issues that helped bring Emory and C/HCA to the table. "Most people who need a cardiac bypass or something like that feel okay about driving into Atlanta to go to Emory Hospital or Crawford Long. But women in labor or patients needing basic hospital services don't want to drive from Duluth to downtown," says Thomas Gilbert, EAHC, LLC partnership president, "especially since babies and accidents have a tendency to come at inconvenient times." As many as 68% of the obstetrics patients who saw Emory clinicians last year delivered their babies in non-Emory hospitals, he points out, noting that all but one C/HCA hospital (Metro) have birthing centers. "I would like to see a significant shift of such patients to our partnership hospitals over the coming years." |
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hile the partnership is expected to help make Emory's clinical enterprise more efficient, user friendly, and accessible, leadership is proceeding carefully to make sure it benefits Emory's academic mission as well. Teaching medical students, residents, and fellows and conducting clinical and basic research are why Emory Healthcare exists, they say. The goal is to balance our missions by taking advantage of an efficient clinical enterprise and using those efficiencies to make sure our academic missions are fulfilled.
Dean Tom Lawley doesn't anticipate any immediate or dramatic impact of the new agreement on the School of Medicine's education mission, but he does see potential longer-term benefits. The community hospitals may someday be venues for primary care training, for example, and provide students and residents more opportunities to get experience with patient populations typical of community practices. "Our training hospitals in general are large facilities that provide tertiary care, and that's very important for our students to learn," says Lawley. "But unless they end up in an academic medical center, most are going to be practicing in other kinds of surroundings." Emory can always use access to more obstetrics patients, he continues. "Emory Hospital doesn't have obstetrics. While Crawford Long and Grady provide OB, there is lots of competition from surrounding hospitals and hospital systems. We need to make sure that our medical students and our OB/GYN, family practice, and emergency medicine residencies all have exposure to obstetrical patients." Lawley says that the moves toward expanding teaching opportunities in the C/HCA hospitals will emanate from department chairs. "We'll evaluate each situation on its own merits," he says. Department chairs, for example, may be able to expand the clinical (volunteer) faculty by working with physicians at C/HCA facilities who are interested in teaching. The alliance also holds promise for Emory's research mission by providing a larger research base. Emory's Cardiac Outcomes Research Unit, for example, hopes to expand its database to include C/HCA hospitals, says Doug Morris, director of the Emory Heart and Vascular Center. "That would give us more information for drug and other studies." Faculty reaction to the new alliance appears to be a mix of concern for protecting and strengthening the academic mission and growing enthusiasm for new opportunities. Many have taken a wait-and-see attitude to what it means to them as individuals. For most, the partnership is expected to have modest if any impact. "Our faculty understand that the challenge for all of us is to interact in a positive way not only with the hospitals but also the private practitioners at the hospitals, and for our faculty to be part of the process of thoughtfully determining how we're going to interact," Lawley says. "We won't be loading up the buses, but I think we need to get to know each others' wants and needs, whether it's for continuing medical education or additional venues for our residency programs. That's very much what the senior management from Columbia and Emory are attempting to do. Our success also will depend on our taking the components of each unit and making them complementary." |
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 mong the many issues explored during the partnership negotiations were those of academia aligning with a for-profit organization, in general, and with industry leader C/HCA, in particular.
Emory Clinic CEO Rein Saral addressed the former issue. "For profit doesn't necessarily mean the evil empire. Everyday we interact positively with for-profit entities - with banks, pharmaceutical firms, Coca-Cola. There's nothing pejorative about a for-profit, and we must recognize as an academic medical center that if we don't have retained earnings, then we cannot fulfill our mission. The most important thing is that we have a common philosophy." Safeguarding Emory's reputation was always on the minds of the framers of the new pact. For the negotiating team, the federal investigation of Columbia/ HCA's past practices was an important consideration in the talks to establish the new alliance. Probably no other medical system in the country today has undergone more thorough scrutiny in recent years. The agreement has been structured so that the LLC is unaffected by the investigation or any outcome of it. Through the process of "due diligence," Emory attorneys and accountants pored for months over private and public records, says Lori Spencer, associate general counsel for Emory Healthcare, whose office is filled with a half dozen thick manuals detailing the company's assets and liabilities. They determined that C/HCA has committed significant resources to meeting all federal and state compliance and regulatory requirements as it has refocused its businesses with new management. The agreement puts in place a number of ongoing safeguards to help ensure quality, beginning with Emory's responsibility for medical management, which will be overseen by Emory Healthcare's president and chief operating officer, John Fox. Before putting the Emory name on the facilities, Emory leadership is working closely with C/HCA administrators to compare operating procedures and guidelines and bring the institutions more closely in line. Emory Hospitals CEO John Henry has assembled a survey team that is now visiting each C/HCA facility to assess areas such as safety, risk management, bylaws, and physical environment. The reviews are two-way, he noted after the first visit to Dunwoody Medical Center, where he was impressed with the Women's Center and staff. "This process is helping us learn more about our operations and how we can work together," he says. Over time, Henry feels there will be many opportunities to jointly develop care maps, information systems, purchasing, and maintenance contracts - "things that can benefit us all." |
    
From obstetrics to geriatrics, Emory will provide a continuum of care |
 igh on everyone's to-do list is forging strong alliances between Emory physicians and the important third leg of the partnership - the private practice physicians on the medical staffs of C/HCA hospitals.
Henry, who has spent more than 35 years working with community physicians at Crawford Long Hospital and who oversaw the consolidation of Emory University Hospital and CLH four years ago, says it's important to understand that the new partners are no longer competitors. "We're collaborators, and it's up to us to do everything humanly possible to enhance our reputations and our working relationships." Probably the most formidable hurdle is effectively blending the systems together as one functioning clinical unit by coordinating such activities as record-keeping and referrals so that it will be easier for community physicians to refer to Emory hospitals than to competing hospitals. Two-way communication will be critical to ensure that adequate information accompanies patients from a C/HCA hospital to EUH or CLH and that good information accompanies the patient back to the C/HCA hospital or community physician. For example, Morris envisions setting up chest pain units in the hospitals' emergency departments and establishing protocols for all Emory and LLC hospitals. As he sees it, people in the community could go to the hospitals nearest them so that most of the chest pain could be dealt with locally. Someone having a massive infarct or in cardiogenic shock could be transferred quickly with one phone call to CLH or EUH. "And if we're smart, we won't just have a one-way flow of patients to Emory Hospitals. We'll send patients back as well so that cardiac rehab could be done at the C/HCA hospital closest to the patient's home." Such an undertaking would also require coordinated marketing so people in the community as well as ambulance companies know what resources are available at the LLC hospitals. "If we're good at it, we would set up programs from prevention to recognition and treatment of acute coronary to secondary prevention or rehabilitation. We would set pathways as to what should be performed at the community hospital level and what at Emory or CLH," Morris says. Such give and take is critical to enlisting the support of community physicians and hospitals. "If patients come to Emory and never go back to their community providers, that's not in anybody's best interests," Morris stresses. "We cannot take care of all those patients here, and if we try, those patients are going to be disgruntled. They're comfortable coming to Emory or CLH if they're very sick. They are uncomfortable coming here on a regular basis just for their outpatient care." The most promising formula for success, he believes, is for patients to return to their community doctors with clear records of what's happened and what their Emory doctor thinks should happen after consulting with their private physician. None of this can take place, Morris stresses, until subspecialists from Emory sit down with subspecialists from C/HCA hospitals, and ask, "What's the mutual benefit?" Many other Emory faculty also have ideas about possible collaborations that might be good for the partners. Neurosurgery chair Dan Barrow, for example, would like to provide subspecialty expertise where appropriate for patients with the most complicated problems, such as intracranial aneurysms or complex tumors. "We may be competing in some cases, and that's one of the challenges. But we hope to work with private practice physicians and offer our subspecialty expertise that may not be available in the community." Individuals with other ideas for collaboration are encouraged to contact John Henry at Emory Hospitals, Rein Saral at The Emory Clinic, or Barbara Schroeder in the strategic planning office. |
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 inalizing negotiations between Emory and C/HCA took months, including painstaking review and approvals from the boards of Emory Healthcare, The Emory Clinic, and the Woodruff Health Sciences Center, before the proposal was presented to the University Board of Trustees. |
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In the final analysis, Emory University President William Chace told faculty and staff at the town hall meetings that these tests were applied to the agreement before it was signed: Was it legally sound and did it give us a sense of security that we as an institution must have. The answer was "yes." Was it financially secure? While he couldn't guarantee absolute fiscal security "because we live in a world of change," Chace said the partnership provides comprehensive distribution of services and a dramatic increase in market share. Did it meet the test of reputation? Chace noted that while the corporation had undergone extraordinary crises, the board was convinced that C/HCA will be a good partner for Emory Healthcare and that "today is a new day." What will the agreement do to the long term for the integrity of Emory and our three missions? Strengthen them all, was the answer. "This is a historic transition in health care and its delivery," Michael Johns adds. "But change is what life is about. In health care, change gives us the opportunity to do better for people who need our services. "Now that all the legal documents have been signed, the real work of reaching out to the private practice physicians at these hospitals and integrating these Columbia/HCA facilities into Emory Healthcare begins," Johns concludes. "Now is the time for all of us to roll up our sleeves and really get to work." |
Copyright © Emory University, 1999. All Rights Reserved.
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Web version by Jaime Henriquez.