CoxHealth enters partnerships with BJC, Cerner

Last week, CoxHealth entered into partnerships with two Missouri health care stalwarts, BJC HealthCare in St. Louis and Cerner Corp. in Kansas City.

The separate agreements are capstones to a busy month that started with the Springfield health system receiving unanimous board approval to become the parent company of Skaggs Regional Medical Center in Branson – a deal in which CoxHealth has committed investing $100 million by 2020.

BJC Collaborative
In the BJC HealthCare agreement, CoxHealth joins Memorial Health System of Springfield, Ill., and Saint Luke’s Health System of Kansas City to form BJC Collaborative LLC, a best practices partnership named after the parent company of Barnes-Jewish Hospital and St. Louis Children’s Hospital.

“There’s a saying that’s becoming popular in the business culture right now: If you want to go fast, go alone; if you want to go far, go together. That’s our thinking right now,” CoxHealth President and CEO Steve Edwards said.

Combined, the four health systems have 4,821 hospital beds in Missouri, Illinois and Kansas and annual revenues of nearly $7 billion. Possible opportunities the collaborative would explore include sharing best practices to improve operations and physician recruitment; resources such as purchasing power; and digital records systems.

BJC President and CEO Steve Lipstein said the collaborative seeks to establish more nimble operations when needed. “We know that the world is changing, so this helps us to really develop a platform that gives us strategic agility,” Lipstein said, noting, along with Edwards, the partners are not pursuing a formal merger. “The key challenge for us is, ‘How are we going to continue to grow in response to demand for what we do and, at the same time, constrain the increasing costs of medical care?’”

To answer such questions, the hospitals have formed an eight-member board comprising the top executive and one board member from each system. The board, scheduled to hold its first meeting in January, would share ideas and make decisions affecting the four health systems, said Edwards, who along with CoxHealth board Chairman James Hutcheson represent the Springfield hospital.

As an example, Edwards said the board might consider purchasing supply items as one entity.

“We already have a pretty robust supply initiative, and BJC is not part of that. The promise of them joining it would add a lot of horsepower – it would add about $1 billion in supply spend,” Edwards said. “The more supply spend you have, the more deeper discounts you can get.”

CoxHealth, Memorial Health System and Saint Luke’s are part owners of Mid-America Service Solutions LLC, an organization formed in 2009 to perform contracting, distribution and consolidated services for its members. The group has an annual supply spend, including purchase services and capital expenditures, of nearly $3 billion, said CoxHealth Senior Vice President and Chief Financial Officer Jake McWay, noting CoxHealth’s own annual supply spend is roughly $175 million.

CoxHealth competitor Mercy Springfield Communities benefits from a systemwide supply spend initiative created in 2002 known as Mercy Resource Optimization and Innovation, allowing the more than 30 hospitals in the Mercy network to buy together. Mercy Springfield Communities spokeswoman Sonya Kullmann said the group has a supply spend of roughly $775 million annually, with the Springfield region comprising $254 million.

Mercy Springfield Communities President and CEO Jon Swope said the CoxHealth partnership is similar in stature.

“I think quite frankly it’s a smart decision,” he said. “It’s consistent with the strategy Mercy chose back in 2002. You have greater ability to control health care costs when you can work with other organizations.”

Lipstein, BJC Collaborative board chairman, said the collaborative would begin by focusing on nonlabor expenses, which make up about 20 percent of BJC HealthCare’s operating costs.

Edwards said health care reform initiatives played a part in the formation of the partnership, as changes to the industry have promise but also “looming dark clouds.”

“Uncertain times become catalytic events for alliances,” he said. “While each system that’s coming together had a great financial year this year, each of them also realizes that with impending cuts and whether or not the Affordable Care Act comes to be or not, the forces that have caused it are still there.”

Si3 with Cerner
For some 15 years, CoxHealth has employed Cerner’s electronic health records software. Now, CoxHealth has signed a 10-year agreement with the publicly traded company (Nasdaq: CERN) that essentially establishes Cerner as CoxHealth’s information technology manager, CoxHealth’s McWay said.

“We’re asking them to really give us a huge amount of support and additional resources that we have not been able to inject into our information technology group on our own,” he said of the strategic alignment, which is dubbed The Star Initiative for Information Innovation, aka Si3.

McWay said CoxHealth has budgeted nearly $400 million for IT during the next decade, roughly half of which would be paid to Cerner for its services, staff work, products and infrastructure. McWay estimated CoxHealth has spent $200 million to $250 million in the last decade on IT services.

With the move, 143 CoxHealth employees – about 95 percent of the hospital’s IT staff – will become Cerner associates  work ing out of Springfield under IT Director Jerry Chamberlain, an employee Cerner is moving to the city.[[In-content Ad]]