UCSF Medical Center and John Muir Health to form joint care network

UCSF Medical Center and John Muir Health have signed a letter of intent to develop a new company that will be equally owned and operated by both organizations. This new company, the healthcare systems say, will allow them to each remain independent yet at the same time work together on a health care network covering the whole San Francisco Bay Area region.

UCSF and John Muir expect a final agreement to be signed by the end of 2014. Among the goals for the new company are creating an affiliation that will allow them to fund future joint initiatives and a shared services organization. Both are rolling out the Epic EHR system, for example, and their press release noted the benefits that could come from coordinating their rollouts.

As oversight of traditional mergers between healthcare providers has grown, so has the popularity of loser forms of affiliation that allow each partner to remain operationally indepenent   yet still work in concert with the other partner organization to improve care and lower costs. But it is not just fear of the Federal Trade Commission that is driving the trend of non-merger mergers. A recent Healthcare Financial Management Association (HFMA) survey revealed that strong healthcare systems are increasingly looking to make strategic alliances with other strong healthcare systems to work together on population health initiatives, cost control and quality improvements. The old model of strong healthcare systems essentially buying market share by picking up struggling smaller healthcare providers is no longer as desirable as it once was, the survey revealed. (Read more here.)

Strong healthcare systems, such as UCSF and John Muir, also typically have strong trusted brands and therefore little interest in assuming the name and identity of the other’s brand, as happens in a traditional merger. But they face a competition risk if other healthcare systems in their markets are able to lower costs through strategic alliances faster than they can. In the San Francisco Bay Area, UCSF and Stanford Hospital and Clinics have a bitter history from a failed 1999 merger and have increasingly been competing with eachother, as the San Francisco Business Times reported earlier this year. Plus, they can’t ignore the activities of other sizeable players in their region, like Kaiser Healthcare and Sutter Health.

“We looked at a number of affiliation options that would allow us to grow without compromising our mission, vision and independence,” stated Cal Knight, President and CEO of John Muir Health, in a joint UCSF-John Muir press release. “We found the right fit with UCSF.”

One of the first of the joint initiatives planned by UCSF and John Muir is investing in a collaboration with other health care providers to form a Bay Area-wide accountable care organization (ACO).

“By combining John Muir Health and UCSF’s strengths, we aim to offer patients the highest value system of care available,” stated Mark R. Laret, CEO of UCSF Medical Center and UCSF Benioff Children's Hospitals, in the press release. “We look forward to working not just with each other, but with other health organizations throughout Northern California, in order to provide an exceptional health care experience for patients.”