Take Five With James Woodward, Part I: UnityPoint and Meriter head down the aisle

The Affordable Care Act has caused and will continue to cause consolidation in the health care industry, so it was no surprise when the West Des Moines-based UnityPoint Health announced that it has entered into an affiliate agreement with Meriter Health Services of Madison. Under the agreement, the entities will combine operations through an affiliate agreement, and Meriter Health Services (including Physicians Plus Insurance Corp.) will become an affiliate of UnityPoint Health.

While regulatory approvals are still needed, Meriter stands to benefit from economies of scale, and UnityPoint, a large health system without a health insurance arm, will benefit from the new life injected into Physicians Plus (PPIC). To get a sense of whether this is a marriage made in health care heaven, IB interviewed James Woodward, president and CEO of Meriter Health Services. You can read Part II of the interview by clicking here.

IB: Regarding the affiliation with UnityPoint Health, what resources can UnityPoint provide that Meriter lacks?

Woodward: First and foremost, they have purchasing power, as a 15-hospital system, that is much greater than ours as a single-hospital system. So we have every expectation that our cost of operating will decrease further through our affiliation with UnityPoint Health. Mainly through their group-purchasing contract, they can buy everything from copy paper to CTs and MRIs. They can buy less expensively than we can as a single organization.

Second, in the area of legal support, we today use a number of different law firms on retainer to provide the day-to-day support that we need from a legal standpoint, whether that’s contracts or whatever. Through our affiliation with UnityPoint, they have a team of lawyers in Des Moines, but we will have onsite, in-house legal counsel that will be made available to us as part of this relationship. That will save quite a bit on our legal bills.

The other is that, as you know, Physicians Plus Insurance Corp. has struggled for a variety of reasons over the past couple of years, and they [UnityPoint] will be providing some immediate financial stability to Physicians Plus, as well as have a very detailed plan to grow Physicians Plus in other markets than just Wisconsin. So we get a huge lift there pretty quickly.

IB: So this is one area where a health insurance company really can sell across state borders.

Woodward: Right. Today, UnityPoint Health is already in Illinois and Iowa and will soon be in Wisconsin, and they have plans to move into other contiguous markets as well. So the idea of having an insurance plan available to them as they see fit strategically, and to enter into those other markets, will be very significant. The other thing that I should mention is that UnityPoint Health has somewhere north of 30,000 employees, and my understanding is that part of the plan, fairly early on, will be to move those 30,000 employees under PPIC as their third-party administrator for all claims and benefits. That also will be a big lift for PPIC, so we see it as a tremendous growth opportunity for PPIC, not just in south central Wisconsin but to go to other states over time.

They [UnityPoint] have an accountable care organization, which is quite large, one of the largest in the country, as I understand, but they do not have their own insurance plans. That was one of the big advantages to partnering with Meriter — we bring that to the table for a system that has 15 hospitals, about 1,000 employed physicians, and 280 clinical locations in two states. Now they will be adding our 10 clinical locations, our 130 doctors, and they will have an insurance plan that they did not have before, that they will be able to leverage across all their multiple markets.

IB: Among the reasons given for this affiliation with UnityPoint Health are to improve care coordination, expand access to care, and share best practices on care processes. Given that organizations can be rather protective of their processes, how sure are you that this is a synergistic fit?

Woodward: We are in the very early stages of implementing a patient-centered medical home. We’re doing that in our clinics now. We have about four clinics live, and our goal has been that by the end of next year, the patient-centered medical home, a new way of delivering care, would be fully implemented within the Meriter Medical Group at that point. UnityPoint Health is actually much further along the spectrum in terms of how they provide care with more of a team focus, how they collect data and manage care for patients that have a chronic disease — much further along than we are. Our hope is that since they have already gone through the trial and error among their 15 different hospitals and 280 clinic locations, they have already gone through a lot of the trial and error on this, so one of the benefits they have is something called Affinity Groups, and their Affinity Groups are represented by each of their hospitals in their system. It’s kind of a clearinghouse for best practices, so that’s another advantage we get for joining them. We can learn from 15 hospitals instead of just learning in our own market.

On the cultural side of things, on the care delivery side of things, we vetted them very carefully on this. We visited a number of their facilities to see how far along they are, both those that are fairly new to it and those that are more mature over the last few years, and they’ve got a lot to offer us. They can help us cut through a lot of the murkiness of trying to build a new care-delivery process. They’ve tested it out and it’s working in other markets, so we can pull those best practices and apply them here. That’s going to be a huge advantage for us, especially over the next 24 months.

(Continued)

IB: Other reasons given for this affiliation are to improve quality and efficiency, and optimize the use of resources. Whenever people hear efficiency with regard to health care consolidation, they increasingly connect it with workforce reductions. Can you guarantee there will be no layoffs at Meriter?

Woodward: Yes, I can. We’ve stated to our employees, as has Bill Leaver, the president and CEO of UnityPoint Health, that there will be no layoffs associated with this affiliation. What I also will quickly point out to our employees is that I’ve been here for seven years, and each year we’ve always looked at reducing our cost of operating. We’ve been very successful with that. We’ve been taking $8 million to $9 million in cost out of the system each year, and we’re doing so with the idea that we want to protect jobs and preserve jobs, not impact jobs. We believe that we can very definitely accomplish that going forward without ever having to touch employees, but we also can’t predict the future. Things can happen as part of the Affordable Care Act or in the state of Wisconsin that would impact us and require us to take more drastic measures, and that would be true for any health care organization.

But as part of the affiliation, we believe that this is a growth opportunity, not an opportunity to contract our employee base. We have indicated to our employees that there will be no layoffs associated with the affiliation.

Look for Part II of this interview in Thursday’s IB Ezine. To subscribe to the ezine, click here.

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