The next era for Methodist Health Services Corporation and its subsidiaries, including Methodist Medical Center, started on June 9, 2011, with the signing of the Strategic Affiliation Agreement with the Iowa Health System (IHS). Subject to final approval from the appropriate regulatory bodies, the effective date of the Strategic Affiliation Agreement is expected to occur on October 1, 2011.
Methodist entered into this relationship for strategic reasons. The Accountable Care Act that was signed into law in March 2010 intends to fundamentally alter the healthcare system as we know it today. If successful, over the next 10 years, the healthcare delivery system will change to a more value-based system rather than a volume-based system. In addition, how healthcare providers are currently paid will change as well.
Given the transformational impact that the healthcare industry will be going through, Methodist felt it needed a “big brother”—a system that we could help build while making sure we continue to thrive during a transformative period. For example, healthcare providers will see their Medicare reimbursement rates reduced by tens of millions of dollars over the next decade. All providers will have to find ways to redesign healthcare to reduce costs while increasing value. In order to offset the payment reductions, one way to do that is to reduce expenses by sharing with a larger organization such things as purchasing of supplies, drugs, medical equipment, etc. A larger system offers economies of scale and size that should reduce our costs.
The transaction will be largely transparent to the community: the Methodist name will not change, the board will remain 100 percent local, employees will remain the same, the medical staff will operate as before. The same level of commitment to the community that has been provided for the previous 111 years will continue. Methodist’s assets and corporations will remain in place, based in Peoria.
While this change will impact how we operate internally at Methodist, it will be largely transparent to patients and the community at large. The change for our employees is that we will now be part of a large family. There are seven senior affiliates, 25 hospitals, 140 clinics and 20,000 employees who work for IHS that Methodist will now join. The opportunities to learn new things, share best practices and see how other hospitals within the family are improving care will be a tremendous resource to Methodist and to our community. Currently, that is a benefit of a system we do not enjoy.
Another benefit to the community is that the people from IHS will be coming to Peoria as well. Methodist has a number of best practices that we are anxious to share with the other senior affiliates of IHS. In addition, IHS has made a commitment that will allow Methodist to pursue its strategic capital needs of the future as economic conditions warrant. In essence, IHS will ensure capital will be invested in Methodist facilities and in our community. With many affiliations, money leaves the community. In our case, money is coming to Peoria!
From now through the tentative closing date of October 1, 2011, Methodist and IHS will be creating integration teams that will begin to identify how we are going to integrate our organizations. This will be a very detailed approach to ensuring that we consider all aspects of our organizations and the most appropriate ways to build upon not only our relationship, but new relationships, and to ensure our operating systems are effectively integrated. A number of potential changes will likely be identified, with a goal to minimize any disruption to our employees, to our physicians and, most importantly, to our patients.
As we go through the next several months and learn more about our IHS family, we are very excited about this opportunity. While we feel great that the assets of Peoria will remain in Peoria and that our board members will remain from the Peoria area, we are not at all expecting to maintain the status quo. We are looking at this as a new adventure to learn more, do more and find better ways to enhance Methodist’s nationally recognized way of delivering outstanding healthcare.
We look forward to further engaging the community as we enter into this new era of Methodist history. iBi