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[Blog] Focus on mutual benefit when evaluating affiliation opportunities

When it comes to assessing an affiliation opportunity, sometimes the most important question may not be what you initially thought. Rather than asking “What can we get from a prospective partner and what do we have to give up?” a better question is “What investment are the prospective partners willing to make in each other and how can value be generated for both parties?” Both seek answers about the value of the affiliation, but the second question recognizes that an affiliation is a reciprocal relationship whereas the first is one-sided.

Over the past couple of years, I have been part of a Stroudwater team working with an academic medical center hospital that is systematically developing a regional system to support its population health strategy. Like many systems undertaking this kind of work, this system wants to expand their base of covered lives and to extend greater access to services in an underserved region. Similar to many across the country, the unaffiliated hospitals in the region have had years of operating losses and are struggling to maintain stable finances with little to no capital available for investment.

This is where the Stroudwater team goes to work: We take a comprehensive look at both clinical service programs and administrative functions for opportunities to increase revenue and decrease expenses. Typically, we are able to identify opportunities well in excess of the losses. Many of these opportunities have gone unrealized due to the small market scale of the hospital and/or the lack of expertise and depth in critical areas. Over the course of the affiliation discussions, we facilitate a series of work groups with leaders from both organizations to develop initiatives that will allow the hospital to reap the benefits of the opportunities.

We have found that hospitals can begin to implement many of the initiatives identified by the work groups and improve their operating performance before full affiliation. By sharing expertise in this way, the parties invest their time in building a working relationship that creates alignment and ownership for the affiliation and sets a strong foundation for a mutually beneficial long-term relationship.

As the shape of healthcare continues to change, relationships between providers become more critical. When thinking about the growing need to partner to sustain your organization and to remain viable in a world dominated by risk-based payments, give Stroudwater a call. We can help you dig beneath the surface to unearth the hidden opportunities and value in a prospective affiliation.

 

Don Horstkotte is a Principal at Stroudwater.

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