Gary Horan is leading one of the handful of independent hospitals that have avoided the consolidation that has gobbled up so many others.
And he’s confident many of the independent hospitals that exist today will exist a decade from now.
But he’s also a realist.
It’s why, as CEO of Trinitas Regional Medical Center in Elizabeth, he has long established partnerships with surrounding hospitals and health systems. And why he may be interested in strengthening some of those partnerships — including an existing relationship with RWJBarnabas Health.
“Our approach has always been to look at strategic alliances,” Horan said.
And it’s why Horan thinks the timing may be right to do more.
“I think we’re in a strong position, we have a strong balance sheet, despite the fact that we are in a city — the fourth-largest city in the state — and all the challenges that go with that,” he said. “We don’t have our heads in the sand. We know the climate that’s in health care now.”
Trinitas currently has alliances with St. Joseph’s Health System, for a joint psychiatry program; RWJBarnabas Health’s Newark Beth Israel hospital, for neonatal intensive care; RWJBarnabas Health, for maternal fetal medicine; Rutgers and University Hospital, for thoracic surgery, vascular surgery, urology and ears, nose and throat; JFK Health (now part of Hackensack Meridian Health), for stroke care; and an alliance with Atlantic Health System’s Overlook Medical Center.
“We have had some discussions about how we might strengthen our alliances with Barnabas and others, and those evaluations are continuing,” he said.
Whether that includes a merger or not remains to be seen, Horan said.
The catalysts for many of the mergers in recent years have been the transition to value-based care and the lower-than-cost reimbursements from government payors — which typically make up almost half of all revenue sources for hospitals.
This is important for independents, Horan said, because commercial payers, and patients who are covered by commercial payers, are a key source of revenue to make up for the shortfall of government reimbursements, such as Medicaid and Medicare — which pay between 70 cents to 90 cents on the dollar for costs incurred by hospitals
Trinitas currently relies about 35 percent on Medicaid, and about 12 percent on commercial payors, Horan said.
That’s not the only way larger systems benefit.
Largest systems have the increased leverage to negotiate better reimbursement rates with insurers. It is a key issue that is playing out as insurers continue to seek narrower networks or tiered networks — which favor some health systems over others for better rates and encouraging greater patient utilization.
“Right now, being independent the way we are, we don’t have the same level of leverage with insurance companies as large systems may have,” he said. “So, that’s something we want to see how we might be able to participate in some arrangement with someone that will help us with the negotiating with insurance companies.”
What would that arrangement look like?
“Relationships with systems can take a number of shapes,” Horan said. “A full-fledged merger is a shape, a joint operating agreement is another way to go, a looser affiliation might be another way to go. And these things all have to be evaluated on their own merits.”
Trinitas already has taken steps to lower its costs through a group purchasing order in New York, one of the largest in the U.S., Horan said.
“The purchasing power with our program is very robust, so that would not be a reason,” he said. “We already have those savings.
“The biggest thing is to be able to tap into resources for clinical staff … and to participate in rate negotiations which are better than what we can do as a hospital that doesn’t have such an affiliation.”
Even as the health care sector pushes for greater reimbursements under value-based care agreements.
“The rates are not universal,” Horan said. “They are hospital-specific or system-specific. Being a part of a larger group might give you an advantage and may also help with the structure and the implementation of bundled payments.”
Rather than the traditional routes of relationships that are available, Horan is looking for something new.
“We’re not ruling anything out,” he said. “We are a Catholic hospital, we want to remain a Catholic hospital, we want the Catholic mission to continue at Trinitas, we’d like to have a certain amount of independence with our board of trustees, we would like our foundation to remain intact — because I think we have an outstanding foundation — we would like participation in governance of whatever type of relationship we have with an entity,” he said.
“We would like to participate in quality programs and collaborations with an entity. We would like to be part of a group where negotiation of rates can be looked at as an entity as the entity rates not as an independent. Those are some of the things that would be important to Trinitas.”
Horan believes that, a decade from now, there will still be independent hospitals. Those left, he said, do not necessarily need to merge to survive.
“If you look at independent hospitals that are left, with few exceptions, most of them are going to be survivors,” he said. “When I say survivors, they are going to survive by themselves or within an arrangement with a system.”