Mega-Networks of Health Care

June 24, 1994

While Washington debates the future of U.S. health care, providers are already scrambling to position themselves for the expected far-reaching changes by forming new, larger alliances.

Nearly all major Baltimore hospitals have formed alliances or merged with community hospitals this year, in an effort to secure a large base of group-policy patients, coordination of resources and the economies of scale that will be essential in winning large managed-care contracts. Managed care, in which groups such as health maintenance organizations pay providers a set fee to treat each covered person, is at the heart of most national health care reform proposals.

The latest alliance involves the Johns Hopkins Health System with Harford County's hospitals and clinics, operated by Upper Chesapeake Health System. The agreement will give the Harford facilities access to the capital and influence of the powerful Hopkins system, which accounts for 9 percent of all Maryland hospital admissions, in building a new hospital near Bel Air.

Hopkins would benefit from Harford referrals to its specialized medical services, and from lower costs of primary care at those hospitals in joint bids for group managed-care contracts.

Hopkins and Sinai recently signed letters of intent to work together with four Baltimore suburban hospitals -- Carroll County General, Howard County General, North Arundel and St. Joseph -- in a similar alliance, or network.

Last month, Greater Baltimore Medical Center, St. Agnes, and Northwest Hospital Center joined forces with Holy Cross of Silver Spring in a company to bid on contracts with managed-care companies. Frederick Memorial is talking with that group.

Good Samaritan, Union Memorial and Franklin Square hospitals agreed in February to merge into the Helix Health System, which includes other nursing, retirement and health care facilities.

Because hospital rates are regulated by the state, these medical consortiums can't cut rates to win contracts from insurers or HMOs. But they can reduce their costs and offer the advantage of dealing with a single entity to provide a large web of health services.

These alliances must still rely on their affiliated physicians to provide the patient base. One concern about this trend of care provider concentration is the reduced voice of the patient in making decisions. That makes the patient's relationship to the physician even more critical.

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