The recent round of protests sparked by a decision to shift abortion services away from Hoag Memorial Hospital Presbyterian in Newport Beach is enough to make some observers wonder about its decision to join with St. Joseph Health to create Covenant Health Network.
The dispute over abortions—they amount to a small fraction of Hoag’s operations, and the hospital plans to ensure the continuation of services at clinics in the area—will likely linger for awhile.
What’s likely to gain more attention over time is the main reason Hoag and Irvine-based St. Joseph joined forces under the Covenant banner: to forge a new business that gives Orange County employers an option for a healthcare system that covers the county north to south with a full complement of medical services.
“We have been spending a lot of time talking to [businesses] and, more correctly, asking them what is it that they need and what are they looking for from healthcare and healthcare providers specifically,” said Richard Afable, chief executive of the newly formed network, which has established its headquarters in Irvine. “The discussion that we have had with many employers in Orange County was a very important part of—and reason why—we did the affiliation in the first place.”
Afable had a front-row seat on the process in his prior job as chief executive at Hoag.
His new position with Covenant puts him in charge of a network that includes six hospitals—Hoag has its main location in Newport Beach and a second in Irvine, while St. Joseph has hospitals in Orange, Fullerton, Mission Viejo and Laguna Beach—along with medical groups, outpatient clinics, and home healthcare services, among others.
All of that comes within a 25-mile radius.
Geography and volume matter.
Services
So do services, according to Afable, who said advanced primary care, preventive healthcare, wellness programs, and integration of healthcare service with open communication were among some of the desires businesses expressed for what is now known as Covenant.
Covenant allows Hoag and St. Joseph “to take care of the health of this community and do it in a way we’d never been able to do it before by extending our capabilities and our reach,” said Robert Braithwaite, Afable’s successor as Hoag’s chief executive.
Hoag and the St. Joseph Health hospitals will be able to “extend [their] expertise” into the larger Orange County community through Covenant, according to Braithwaite.
One example: The combination under Covenant will give Hoag access to St. Joseph’s home healthcare business.
“Now, we’ll be able to coordinate Hoag health services in a much more integrated fashion,” Braithwaite said.
And St. Joseph Health patients will now have access to the Hoag Orthopedic Institute and the Hoag Heart Institute thanks to the Covenant network, he added.
St. Joseph Health and Hoag have existing contracts with all major insurers operating in OC, Afable said. PPO patients, who usually have a wider choice of facilities and providers, would have access to all of the Covenant facilities, while HMO patients often are in “narrow networks” that dictate where a hospitalization occurs, he added.
“Given the Hoag and St. Joseph affiliation is a recent event, joint contracting in specific networks would not yet have occurred,” Afable said. “Most renewals would take effect Jan. 1, 2014, and joint contracting could occur at the time.”
Hoag initiated the Covenant regulatory application.
Braithwaite said “everybody has been talking to everybody for an extended period of time,” but Hoag’s board and executive leadership felt that St. Joseph Health was the best group to go with.
There is room for other health systems to possibly work with Covenant in the future, according to Braithwaite.
Afable indicated Covenant would be able to, among other things, provide for the needs of larger employers that have workers living all over the area.
“Local care, if you’re Allergan [Inc.] or if you’re Edwards Lifesciences [Corp.] or if you’re Pacific Life, local care is all of Orange County,” he said. “Covenant will provide for the needs of those organizations.”
St. Joseph and Hoag found that, as part of the process of putting together Covenant, “there are many concerns and significant needs within the employer community,” according to Afable.
Integration
St. Joseph and Hoag have primarily been “assembling the integration elements” needed for Covenant since March 1, the day the combination became official, Afable said.
Covenant had its first board meeting on April 23, following a March board retreat.
Joe Wilkins is Covenant’s board chair and an executive with New Jersey-based medical laboratory Quest Diagnostics Inc.’s operations in Orange County.
Other directors are Loren Shook, chief executive of San Juan Capistrano-based Silverado Senior Living Inc.; Dr. Mike Sugarman, president of St. Joseph Heritage Healthcare, a medical group affiliated with St. Joseph Health; Lisa Perrine, chief executive of Cibola Systems Corp. in Orange; Steve Jones, president of Snyder Langston Construction; Rick Norling, a former chief executive of Charlotte, N.C.-based hospital supply group Premier Inc., who has also served on Hoag’s board; and Dr. James Caillouette, surgeon in chief at the Hoag Orthopedic Institute in Irvine.
Covenant also had to make sure it followed directives set out by state Attorney General Kamala Harris’ office in her decision to allow the affiliation.
Harris’ office set new benchmarks on women’s health services, the amount of charity care, and other pro bono work that Hoag would be required to provide for six years after Covenant’s establishment.
St. Joseph Health is a Catholic system, while Hoag is affiliated with the Presbyterian Church.
St. Joseph has said its facilities will continue to comply with directives of the United States Conference of Catholic Bishops, which generally opposes abortion and contraception.
The attorney general’s office has said that Hoag “shall take steps to insure that alternative providers are available and accessible to all women, especially low-income women” in the hospital’s service area if the St. Joseph’s statement of common values is applied.
The parties have also turned to some outside help as they seek to combine.
Covenant hired an outside consultant to help its internal integration team of St. Joseph Health and Hoag representatives.
Afable said having an outside consultant could “help us to move this expeditiously.”
He added that the consultant could also alert Hoag and St. Joseph to “also be careful that there aren’t major gaps that we might be missing.”
“As you might imagine, whenever two organizations get together, especially two large and successful ones like Hoag and St. Joseph Health, there’s going to be a lot of cultural differences and a lot of cultural similarities,” he said, adding the latter needs to be applied to the shared Covenant vision.
Covenant officials have introduced the concept of the organizations working collaboratively and how it would apply to existing contracts between its providers and insurance companies.
Covenant will be “used as a tool for healthcare delivery in the community on a need-to-know” basis, Afable said.
He said, for instance, that a family living in Fullerton would be told about St. Jude Medical Center or the Heritage St. Jude medical group instead of Covenant Health Network.
“On the other hand, there are employers who have employees all throughout the county and need to know about Covenant Health Network,” he said, mentioning that marketing and communication efforts will stick to that principle.
Braithwaite, the Hoag chief, mentioned that Covenant’s already “set into motion” some of its necessary information technology efforts.
Those include a “health information exchange,” which allows Hoag to communicate with doctors, pharmacies and skilled nursing facilities “that have different and discrete information systems,” he said.
How Covenant plays out in the market will depend on its relationships with health insurers, said Karen Nixon, president of Nixon Benefits Inc., an insurance and employee benefits firm in Newport Beach.
Covenant could eventually result in lower healthcare costs and insurance premiums for businesses if it’s broken out as a “mini-network” offering, something that would allow them to negotiate lower fees, according to Nixon.
“You do get lower cost of care … it’s a lower cost of delivery,” Nixon said. “There’s less excess of administration, there’s [fewer] mistakes made that are harmful and drive up [costs].”
Kaiser
Covenant’s cost trend could resemble that of Oakland-based Kaiser Permanente, a pioneer integrated healthcare delivery system that operates hospitals in Anaheim and Irvine, along with OC’s largest HMO, Nixon said.
“It’s a fantastic concept,” she said. “I mean, to have other competitors to Kaiser is terrific. It only helps us as patients.”
Kaiser was diplomatic, saying that the entry of Covenant “creates the finest quality of service and care for residents of Orange County.
“We applaud both Hoag and St. Joseph Health as they come together to better serve their patients through Covenant,” Julie Miller-Phipps, senior vice president and executive director of Kaiser Permanente Orange County, said in a statement.
