A rising number of health systems and community-based providers have been making larger investments in palliative care through joint ventures.
This cooperative model is proving to be a good fit for many health systems that may not have the time or resources to build their own home-based care programs from scratch.
Matt Tanzer, managing director of joint ventures at BAYADA Home Health Care, said the underlying driver for these partnerships has been the expansion of value-based models that hold health systems accountable for the entire care continuum.
“Progressive health systems understand their critical need to ensure high-quality home-based care for their patients, but that’s often not a capability they are focused on executing,” Tanzer told Palliative Care News. “An experienced home-based care provider can ensure consistent operations and clinical excellence while the health system maintains shared governance.”
Joint ventures offer an opportunity for health systems and providers to work together to reduce overall health care costs and improve patient experiences and outcomes.
“When a health system is able to entrust their hospice, palliative care and/or home health assets to an expert in the field, they can shift their focus to other areas where they are or can become world-class, and in some instances, create liquidity through the transaction,” Tanzer said. “For the provider, the benefits include deep clinical integration with the health system, exposure to health system-led innovation and the benefits of delivering care under a unified health system brand.”
Dr. Nathan Goldstein, professor of geriatrics and palliative medicine for the Icahn School of Medicine at Mount Sinai, said he agrees.
“These partnerships are a win-win-win. They help the academic center grow or sustain their program,” Goldstein told Palliative Care News. “They help the capital partner create novel programs and ensure their success; and the program provides much needed palliative care services to patients and their families in the community in settings in which they might not otherwise have access to them.”
Risk for reward
While joint ventures can be incredibly beneficial, they are not without risk.
Tanzer said that any new partnership requires tremendous care and support for stakeholders during the transition. A venture can often be disruptive for employees, community members, payors or other partners engaging in a new partnership.
“Communication is key, and above all, the health system and home care provider need strong mission alignment for the joint venture to be successful,” Tanzer said.
That communication should start in the very beginning when contracts between health systems and providers are first developed.
“Contracted relationships should be mutually beneficial for every stakeholder group involved,” Tanzer said. “Unfortunately, sometimes the interests of the health system and the interests of the home care partner are not entirely aligned, and if these issues are not anticipated in the contract, then that can create problems down the road when the JV is more mature.”
It’s important for partners in the JV to agree on the size of the team and who will employ the members of the team, according to Goldstein.
“Will they be employed by the JV, the health system, the corporate partner or some sort of hybrid model? This decision has to take into account local, state and federal regulations about who can employ team members to provide care in a home-based setting, which can be quite complicated,” Goldstein said. “Thus, these contracts often have to include members of each side’s legal team as well as compliance.”
“It is important in the contracting phase to explore all the strategic objectives of both parties and to structure the contract in a way that considers and reflects those dynamics,” Tanzer added.
The price of partnership
When it comes to funding a joint venture, an investment must come from a partner willing to bring the capital to the relationship, such as a private equity or a corporate partner.
“The amount of investment will of course vary by program, including its size, the members of the team and the local environment as it relates to salaries and benefits,” Goldstein said.
Joint venture financing also depends on home health, hospice or palliative services that may or may not exist in the market in which the JV is being formed, Tanzer indicated
A health system may have existing operations and require a JV partner who can contribute capital and become an owner within the JV. Another venture scenario might see the home care provider contributing operations with the health system supplying capital.
Sometimes ventures are formed to begin new operations from scratch or jointly acquire existing assets, according to Tanzer.
No matter the scenario, a joint venture requires working with insurers.
“Fee-for-service insurance programs don’t cover the cost of the entire interdisciplinary team that is required to provide true high-quality palliative care,” Goldstein explained. “So, often the JV needs to work with insurers, including Medicare and Medicaid, to engage in risk-contracting to help cover some of the costs of these programs.”
Tanzer said that there is also the matter of the way funds flow between the health system and the home care partner, including the purchase price of initial assets, fees associated with delivering managed services, leases and other types of arrangements. Those funds need to be fair-market tested to ensure an arms-length relationship.
Payment arrangements can take many forms and may include splitting costs or savings, based on the agreement between the partners and insurers.
“There are also examples of consulting arrangements where the health system is paid to provide continued expertise and oversight for the clinical team and advising to the JV,” Goldstein added.
A board of directors typically determines how finances flow, as well as the direction of the joint venture.
“Once a ‘NewCo’ joint venture is formed, a governing board of directors is established, which is typically composed of leaders from both member institutions. Moving forward, the board is accountable for setting capital allocation strategies for the JV,” Tanzer said. “As the JV generates an operating surplus, the board will decide whether to reinvest those funds in the JV for future growth, to return capital to the health system and provider organization or a combination of both.”