Ochsner solidifies its position in northern Louisiana (updated)

Please see update at the end of the post.

With new two affiliations, Ochsner Health has solidified its clinically integrated network in the most populous parish (East Baton Rouge) and built a beachhead in the one part of the state where it lacked a partner (the northeast). The two new partners are General Health System in Baton Rouge (announced in late March) and Glenwood Regional Medical Center in Monroe (announced in early April).

Major systems and beds in Ochsner network 2016

These affiliations have a several implications:

  • Ochsner Health Network is now viably state-wide. Its affiliates are directly present in 11 of the most populous 15 parishes in the state and the remaining 4 (Livingston, Tangipahoa, Bossier and Ascension) fall easily within the service areas of these affiliates
  • Competitively, the moves strengthen Ochsner’s position relative to the Franciscan Missionaries of Our Lady (FMOL) system which has leading bed share in both Baton Rouge (810 beds) and the Monroe area (550 beds)
  • Ochsner has included a major for-profit player among its partners. Glenwood Regional is owned by IASIS, a major hospital chain owned by TPG and which recently filed for an IPO. This is not the first time Ochsner has strategically partnered with for-profit enterprises: they have a joint venture with Adeptus to put free-standing ERs in New Orleans). Together, these moves suggest Ochsner is developing an ability to structure win-wins with well-capitalized, earning-minded players, potentially opening the door to more capital-intensive strategies in the future.

Roughly coincident with the formation of these alliances, Ochsner announced the new leadership team for Ochsner Health Network. The president is the former chief medical officer at BCBSLA (which currently provides health coverage for state employees) and one of the vice presidents was assistant commissioner in the state administration with oversight of the state employee health plan. They should be well equipped to argue its value relative to health plan networks to the state government: can direct contracting discussions be far off?

Partnership discussions with Baton Rouge General (BRG) did not bear fruit. In 8/16, BRG CEO Mark Slyter (reportedly a key internal advocate for the discussions) abruptly departed and discussions were discontinued as of 12/16. Subsequently, Ochsner announced plans to expand outpatient services in Baton Rouge with $100M investment in a new, 5-story 155K sq. ft. medical office and a micro-hospital at The Grove and a new 20K sq. ft. cancer center near its existing hospital. Ochsner also hinted at more plans to open 3-5 new facilities over the next 3-5 years in Baton Rouge. Notably, the Grove site will replace Ochnser’s Summa site which it has leased from BRG for last 20 years.

Also, the partnership between Adeptus and Ochsner fell apart as Adeptus went into bankruptcy in 4/17 . One of the 3 planned free-standing ED’s was opened (Marrero); the outlook for the other 2 is uncertain. However, Ochsner has not shied away from for-profit partnerships. The existing partnership with Select Medical for a rehab hospital in Jefferson is on track and expected to open in early 2018. Also, in 5/16, Ochsner launched a JV with Acadia for an 82-bed behavioral facility at the River Parishes site. Perhaps the lesson Ochsner drew is to prefer strategic partnerships with established, well-capitalized players (Acadia’s market cap is $2.9B and Select Medical’s is $2.4B).

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