Tufts Medical Center is in talks to team up with for-profit Vanguard Health Systems to buy independent hospitals and provide more integrated health care across Massachusetts.
The proposed alliance, while stopping short of a merger, could give Tufts and Vanguard more clout to compete for unaffiliated community hospitals with the fast-growing Steward Health Care System as well as with Partners HealthCare System, the state’s largest medical care provider. It could also help the expanded system negotiate better contracts with insurers.
Tufts and Vanguard have been mostly on the sidelines during the past two years as Steward, Partners, and Beth Israel Deaconess Medical Center added to their franchises. The current talks grew out of existing clinical affiliations between Tufts and Vanguard, both parties said.
Under their envisioned partnership, Tufts, located in Boston’s Chinatown neighborhood, would retain its status as a nonprofit teaching affiliate of Tufts University School of Medicine. Vanguard, based in Nashville, would remain an investor-owned chain of 29 hospitals nationwide, including MetroWest Medical Center in Framingham and Saint Vincent Hospital in Worcester.
But they would form a pair of joint ventures with hybrid legal structures that would enable them to play more prominent roles in the state’s rapidly changing health care industry.
One collaboration, a “management services organization,” would be partly owned by the Tufts physician group, called the New England Quality Care Alliance, which already has a relationship with Vanguard’s MetroWest. The arrangement would expand existing medical services in areas such as chronic care management, and allow Tufts and Vanguard to jointly share the risk of managing new global payment contracts with health insurers. Such contracts give doctors and hospitals fixed budgets to care for patients and reward them for providing quality care under budget.
Doctors in the New England Quality Care Alliance would also take part in Vanguard’s existing programs for Central Massachusetts employers that focus on wellness.
The second venture would allow Tufts and Vanguard to offer a range of options — from clinical affiliations to mergers to acquisitions — to independent hospitals eager to bolster their financial standing and prepare for a future that will include more coordinated care. Until now, Steward and Partners — because of their heft — have held an advantage when bidding on community hospitals.
Tufts physicians group officials have begun informally briefing their 1,600 members — employees of Tufts Medical Center and affiliated doctors — about the negotiations. The doctors would have to sign off on the alliance and would be critical to its success.
“You have to bring physicians into the discussion,” said Eric Beyer, chief executive of Tufts Medical Center, which in addition to MetroWest has clinical affiliations with Lawrence General Hospital and Jordan Hospital in Plymouth. “You can’t present this as a done deal.”
It’s unclear how Massachusetts regulators will react to potential acquisitions involving money pooled by nonprofit and for-profit partners. Both parties said they would consider new or expanded hospital partnerships anywhere in Massachusetts. A representative from the state attorney general’s office had no immediate comment Tuesday.
The first test case may be Tufts’ plan to take a minority stake in MetroWest, which operates Framingham Union Hospital and Leonard Morse Hospital in Natick.
“It’s Vanguard’s way of tying our cart to Tufts,” said Erik Wexler, president of the New England market for Vanguard and chief executive of Saint Vincent Hospital, which has residency programs with the University of Massachusetts Medical School in Worcester.
MetroWest hospitals already are for-profit, and any nonprofit jointly purchased by Tufts and Vanguard would have to convert to a for-profit, according to the parties. That process requires a recommendation by the state attorney general to the Supreme Judicial Court of Massachusetts, which would have to approve the conversion. The state Department of Public Health also must grant new licenses to turn a nonprofit hospital into a for-profit organization.
Despite the organizations’ different ownership structures, Tufts and Vanguard executives said Tuesday that they have similar cultures and a shared focus on serving patients. “Our view is the best systems evolve over time because you have a common view and common values,” Beyer said.
Financially, neither partner is among the state’s best-performing hospital organizations. Tufts posted a modest profit of $7.2 million last year, while MetroWest lost $2.8 million, according to data released this month by the state Division of Health Care Finance and Policy.
Tufts, its doctors group, and MetroWest already are working together in other ways. Last month, they were awarded an $88.5 million loan by the US government to create the nonprofit Minuteman Health Initiative, the state’s first member-owned health insurance plan. It plans to offer coverage starting in 2014 to individuals and small businesses through private brokers and the Massachusetts Health Connector, the state’s online insurance marketplace.
Jeffrey I. Lasker, president of the New England Quality Care Alliance, said members briefed on the plans had plenty of questions but were excited about the prospect of strengthening Tufts’ alliance with Vanguard. “We want to preserve care at community hospitals, and increase the amount of care provided at local community hospitals,” Lasker said.
Partners chief executive Gary Gottlieb said Tuesday that he couldn’t comment on the Tufts-Vanguard alliance until he finds out more about how it will work. Steward spokesman Chris Murphy said, “Anything that keeps health care in the community is a good thing.”
The Massachusetts Nurses Association, which represents registered nurses at Tufts and Vanguard hospitals, has clashed with management at both organizations during recent contract talks.
“Our main concern is that Tufts survives and remains viable in this marketplace,” said union spokesman David Schildmeier. “We’re going to keep a close eye on this to make sure that the quality of patient care is put in the forefront of whatever happens.”