Seven Hospitals Join Forces to Fight Competition : Health: The group is jointly marketing its medical and surgical services to insurance firms and managed-care organizations.
Attempting to gain an edge against the competition, seven Orange County hospitals have begun jointly marketing their services to insurance companies, managed-care organizations and self-insured employers.
After more than a year of organizing efforts, the seven hospitals, including UCI Medical Center, have appointed a representative to negotiate rates and other terms with potential clients.
“This network can sit at a table and bind all parties to an agreement,” said Gregg Masters, chief executive of the organization called LifeCare Network of Orange County.
In addition to UCI Medical Center, which is owned and operated by the University of California, the network consists of AMI (American Medical International) Garden Grove, the soon-to-open AMI Irvine Medical Center, Anaheim Memorial Hospital, Los Alamitos Hospital, Placentia Linda Hospital and Humana Huntington Beach.
Together, the hospitals, most of which are moderate-size community facilities, represent 1,513 licensed beds and gross annual revenue of $857 million, Masters said.
He said that the hospitals are spread throughout the county that all but two--AMI Garden Grove and UCI Medical Center--have separate service areas and don’t compete directly against each other. He conceded that the group’s representation in parts of South County is somewhat weak.
By signing up with the network, he said, insurance carriers and managed-care organizations can gain access to countywide hospital services at discounted rates and avoid the trouble of negotiating separate contracts with individual hospitals.
In turn, the hospitals are hoping that the joint deals they reach will funnel a greater volume of patients to them and away from other hospitals in the county.
Networking is a method hospitals are using to help them survive in an era of declining patient census and reimbursement shortfalls in Orange County and nationwide.
“Orange County has 30 (actually 34) hospitals and that is too many,” Masters said. “The network is a way to position your hospital to have a competitive edge.”
The next step, Masters said, is to bring medical groups that are already affiliated with member hospitals into the shared marketing network.
Since May 1, Masters said, the LifeCare Network has negotiated three contracts. The largest is with Occupational Urgent Care Health Systems, a statewide preferred provider organization based in Sacramento that specializes in workers’ compensation.
Maureen Millstine, director of marketing for OUCHS, said her group prefers to deal with networks such as LifeCare “not only because it brings to the table a number of hospitals, but also they will bring their physicians into it.”
The Sacramento organization already had individual contracts with four of the seven network hospitals. But Millstine said the hospitals can expect to get more business from OUCHS as a result of the agreement with LifeCare.
In addition to providing access to hospitals and physicians, Millstine said, LifeCare will package a variety of services for its clients through subcontractors, including utilization review, case management and claims administration.
While the LifeCare network is confined to Orange County, Masters said it has a joint marketing agreement with Pacific Health Alliance, a statewide group of health-care providers based in San Mateo that serves employers throughout the state.
Masters acknowledged that his client hospitals are not the only ones in Orange County to try to gain marketing clout through networking.
A rival of LifeCare, he said, is Preferred Health Network, a statewide preferred provider organization owned by 27 hospitals, including five in Orange County: Hoag Hospital in Newport Beach; St. Jude Hospital and Rehabilitation Center in Fullerton; St. Joseph Hospital in Orange; South Coast Medical Center in Laguna Beach and Saddleback Memorial Medical Center in Laguna Hills.
A number of other Orange County hospitals belong to yet another Southern California hospital alliance called the Coalition of Health Care Providers. They are: Western Medical Center-Santa Ana, Brea Community Hospital, Mission Hospital Regional Medical Center in Mission Viejo and Fountain Valley Regional Hospital and Medical Center.
Scott Roman, a Newport Beach attorney who is general counsel and executive director of the 15-hospital coalition, said the hospitals save money by jointly purchasing advertising, printing services and other items.
But he recommends against having the alliance members jointly negotiate contracts with insurance carriers and other payers. “I think there are some possible antitrust ramifications if it is not done properly,” he said.
Masters said LifeCare believes that it has avoided any antitrust pitfalls. He noted that the health care market in Orange County is very fragmented and that the seven hospitals control a small part of it and generally don’t compete with each other.