Ohio’s Mercy-Summa alliance grows contracting teeth

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Mercy Health – the largest system in Ohio – has recently formed a Clinically Integrated Network (CIN) with Summa Health called Advanced Health Select. CINs allow separately owned provider systems to jointly contract with payers on a risk basis as well as invest in clinical systems to support consistent practice and joint accountability. The model offers some key advantages of affiliation (joint economics and investment) without the regulatory hurdles, governance challenges and business risks change of control usually entails.

Mercy and Summa had two prior business relationships: First, Mercy holds a 30% share of Summa (and as part of that, controls five board seats and hold certain veto rights). Second, Mercy and Summa are both part of Health Innovations Ohio, a statewide innovation and capability-sharing alliance set up by Mercy and which includes several other systems in Ohio such as University Hospitals, Mt Carmel and Kettering.

Is Advanced Health Select just an enhancement of Mercy’s strategic relationship with Summa or a precursor to the next stage of HIO’s evolution towards a business enterprise? Evidence is ambiguous. The CIN could be seen as a targeted response to Cleveland Clinic’s decision to fully take over the Akron General system (which competes vs. Summa) this past August. Mercy certainly appears to be retaining very tight control over the CIN which may have dissuaded other HIO members – proud, strongly performing systems themselves – from joining. Also, the CIN has some glaring geographic gaps (notably Columbus and Cleveland for facilities which could have been filled by other HIO partners), suggesting that a state-wide network might not have been the goal.

Despite the geographic gaps, Advanced Health Select does cover a lot of territory and appears competitively threatening (the announcements loudly tout the $100M spent in capability upgrades within the network so far and promise another $35M in investments going forward). Cleveland Clinic – which leads the other state-wide best practice sharing alliance called Midwest Health Collaborative – may focus on the risky scenarios that this new CIN could win large preferred network deals with major Ohio employers if left unanswered, and feel obliged to create their own CIN to “re-level” the playing field. Narrow networks are so strategically threatening that, once introduced, they compel their own replication by competitors (we see that in Vivity in the Los Angeles area and playing out now in Oregon with the major stand-alone providers such as OHSU taking a stake in insurer Moda and Legacy Health forming a joint venture with PacificSource Health Plans). There was always a promise that the two big Ohio state-wide innovation collaboratives HIO and Midwest Health Collaborative would, at some point, become contracting entities. Planned or not, Mercy has taken a big step towards this endgame.