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Group plans to form largest U.S. hospital alliance

By David Jones

NEWARK, New Jersey (Reuters) - Seven hospital systems in New Jersey and Pennsylvania will form what executives say will be the largest U.S. healthcare alliance in the country.

The number of hospital mergers has soared in the past several years as providers band together to increase their power to negotiate higher reimbursement rates from insurers.

Called AllSpire Health Partners, the alliance will allow the member institutions to save on costs and share medical expertise, the hospital systems said on Thursday.

The alliance is part of a trend towards market consolidation as the Affordable Care Act is pushing hospitals to achieve greater negotiating leverage, said Joel Cantor, director of the Center for State Health Policy at Rutgers University.

The alliance will include such systems as the Hackensack University Health Network in New Jersey and the Lehigh Valley Health Network in Pennsylvania and have combined annual revenue of $10.5 billion.

"Really we're focusing on two aspects: how to improve the quality of care and how to reduce the cost of care," said Joe Trunfio, president and chief executive officer of Atlantic Health System in Morristown, New Jersey.

Nationwide, there were 36 such mergers or acquisitions in 2009, 69 in 2011 and 72 last year, according to FTI Consulting's Center for Healthcare Economics and Policy.

The wave of mergers has raised concerns that large hospital systems will drive up healthcare costs because they have greater leverage in negotiations with insurers. But Trunfio told Reuters that because AllSpire is an alliance and not a merger or acquisition that will not happen.

Still, AllSpire hopes to cut costs by 3 percent to 4 percent over the next few years, he said.

Cost-savings will be more important under the law known as Obamacare because reimbursement will shift from a traditional fee-for-service model to payment that is based on improving outcomes for patients, Trunfio said.

Trunfio said the alliance will not cause employees to be laid off or hospitals to close.

The other hospital systems entering the alliance include Meridian Health in Neptune, N.J., and Lancaster General Health, Reading Health System and WellSpan Health, all in Pennsylvania. The combined systems include 25 hospitals and at least five affiliate hospitals, including in New York State. The alliance will be open to additional hospitals that join the systems, officials said.

(Editing by Sharon Begley and Kenneth Barry)

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