CEO Notes

John Murphy, MD, President and CEO, WCHN

An update and an introduction to our strategic Value Care Alliance

Happy summer to all of you! I certainly hope you’re finding a little time to get away on vacation and recharge your batteries. It was nice to see so many of you at the opening of the new Peter and Carmen Lucia Buck Pavilion at Danbury hospital this past month. It was certainly a wonderful evening and we will soon be putting the beautiful new facility to its intended use as patients start occupying the floors in a few short weeks.

The New Milford Hospital Emergency Department project is on schedule as is the new ambulatory pavilion at Norwalk Hospital. We will have more to say about those exciting new additions in upcoming newsletters.

One item I’d like to bring to your attention this month is the “Value Care Alliance”. This represents a significant strategic development and I would like to give you some background on it before you hear about it in the press. I hope to get the opportunity to speak to you directly about this Alliance at a future Medical Staff meeting.

Over the past 16 or so months, I have been working with my counterparts at several other non-profit, independent hospitals in Connecticut to create what we are now calling the “Value Care Alliance”.  The other co-founders of this new entity are Middlesex, Griffin and St. Vincent’s Hospitals (Bridgeport) and Lawrence and Memorial Hospital.  We expect to add to the list of participating hospitals over the next few months. The formation of this alliance will be publicly announced in the near future. The purpose of the VCA is to help each of the founding hospitals maintain their respective independence and not-for-profit status at a time when many other Connecticut hospitals are either merging into Hartford Healthcare (for example, Backus, Windham, Mid-State, Hospital of Central Connecticut) or into Yale-New Haven (for example, St. Raphael’s, Greenwich, Bridgeport), or are being acquired by for-profit operator Tenet (e.g., Eastern Connecticut Health Network, Waterbury, St. Mary’s, Bristol Hospitals).  A similar phenomenon is taking place in Rhode Island, too.

We think by working together through the VCA, each member hospital can realize some, but not all, of the advantages imputed to mergers without all the political, financial, and regulatory issues that also often come with full asset mergers.   Indeed, we’ve discovered that there are a growing number of similar alliances which are springing up around the country as an effective strategic alternative to mergers.  While we continue to believe that the types of mergers which have created our three-hospital network were vitally important and will continue to be the lifeblood of our future success, this Alliance represents a complementary strategy that we hope will add to our momentum as a growing network.

One of the specific goals of the VCA in recognition of its lower cost structure, is to create one or more narrow networks, as well as tiered insurance products which we believe will be substantially less costly to employers and their employees than conventional insurance products. Through benefit design, the patient would be incented to choose the lower cost VCA-member hospital and affiliated physicians over a higher cost medical center for his/her routine care in exchange for a lower premium and lower out-of-pocket payments.  We believe this approach will enhance each of our hospital’s ability to provide high-quality, affordable health care; offer area employers and their employees lower cost health insurance; and help increase volume for all of our hospitals, affiliated physicians and our employees by limiting the number of patients who currently go out of area for routine hospital services and physician care.

We are probably a still a number of months away from actually launching an insurance product but we think it was important to let everyone – insurers, other hospitals, our respective employees, our respective medical staffs, employers, etc. – know at this point who we are, what we are doing, and why we are doing it. As we move further along, we will get all of you more details.

Enjoy the rest of the summer and I hope to see you soon.

John