Altoona Regional Health System and Nason Hospital have signed a non-binding agreement to create a countywide health care system.
Coming eight years after the creation of Altoona Regional through merger of Altoona and Bon Secours-Holy Family hospitals, the possible further consolidation is "not only inevitable, but is of great potential benefit," said Dr. Jeffrey Rosch, an officer on Altoona Regional's staff.
Otherwise, area hospitals will be "swallowed up" by large urban centers in Pittsburgh or elsewhere, Rosch said.
Details of the proposed affiliation need to be worked out, according to a joint hospital Altoona-Nason news release. That could mean eventually that Nason patients in Morrisons Cove might need to travel to Altoona for care they can now get at Nason, according to Rosch, who has not been part of the nine-months of discussions that led to Thursday's announcement.
But if UPMC in Pittsburgh or Penn State Hershey Medical Center or Geisinger Health System or the Cleveland Clinic or a hospital in Philadelphia or Washington, D.C., ends up in control of our local health care facilities, those patients would need to travel much farther for some specialty care, he said.
Conversely, if hospitals in the region band together to create the necessary economies of scale, they might be able to offer additional services now only available at those bigger, "tertiary" hospitals, thus offsetting the elimination of some of the truly local services at a small hospital like Nason, Rosch said.
It all depends on scale, Rosch said.
Health care "margins" are slim - 2 or 3 percent - and threatening to get slimmer, as costs go up and reimbursements from insurance, especially Medicare and Medicaid, go down, Rosch said.
The only way to eke out enough profit to buy the equipment needed to keep up with quality standards is by consolidating to increase the numbers of patients served, he said.
If your annual costs are $100 million, the $2 million or $3 million extra may not be enough. But if you increase your size and you're pushing $1 billion, the $20 million or $30 million cushion may be enough.
Altoona Regional actually lost $3.9 million on operations, for a negative 1 percent margin for the fiscal year ending in mid 2011, according to its most recent annual report.
No one knows yet the nature of the "alliance" Altoona Regional and Nason are planning, according to Dr. Stephen Schmidt, who is on both hospitals' staffs.
The two sides will try to work out the details of a partnership over the next several months, according to the news release, which stated there would be no further comment from the hospitals.
Still, the release seems to point to a more all-embracing version of health care than may currently exist here.
"The Memorandum of Understanding outlines the criteria [for] ... creation of a fully integrated health care system," the release states.
"It is important to refocus the health care resources in Blair County from a hospital-centered model to an integrated health care delivery model," stated Rob Halbritter, chairman of the Altoona Regional board, in the release.
According to Mosby's Medical Dictionary, "integrated health care delivery" is defined as a managed care system that includes "a hospital organization that provides acute patient care, a multispeciality medical care delivery system, the capability of contracting for any other needed services and a payer [an insurance component]."
Such systems arrange for "a coordinated continuum of services to a defined population" for which the system is "held clinically and fiscally accountable," according to the Washington State Hospital Association website.
Those systems can include home health care, hospice services, social services, rehabilitation, preventive care, health education and financing, according to the website.
Reached Thursday evening, Halbritter - in keeping with the note in the news release - declined to elaborate on his use of the term "integrated health care delivery model."
Altoona Regional and its affiliates already provide a wide variety of services at virtually all levels of health care including doctor groups, a pharmacy, home health medical equipment, home nursing, anesthesia, radiology and a managed care organization for employers.
The Nason board was unanimous in approving the memorandum of understanding to pursue the partnership, which followed nine months of discussion with Altoona Regional, according to the news release.
The partnership "has the potential to bring additional operational resources," said Chairman Steve Martz.
The agreement doesn't include Tyrone Hospital, although Tyrone was part of the discussion, as stated in March by CEO Stephen Gildea, who said then all three hospitals were "trying to figure out how to work together in a cooperative way for better care."
An attempt to reach Gildea for comment wasn't immediately successful Thursday.
Community hospital boards have "a fiduciary and moral responsibility" to try to maintain their assets, and they're "exploring any and all options," Alvin J. Harper, president of the Hospital Council of Western Pennsylvania said in testimony recently before the state Senate Majority Policy Committee.
"Strategies include outright merger and acquisition, a shared corporate governance model, selling to a for-profit hospital corporation or creating closer clinical affiliations with tertiary providers while remaining as an independent organization," he said.
Big "nonprofit integrated delivery networks" like UPMC, Geisinger and the Cleveland Clinic are trying to develop regional or nationwide systems, he said.
And insurance companies have entered the market, as exemplified with Highmark's proposed acquisition of West Penn Allegheny Health System, he said.
"All the big players are talking," Schmidt said. "Everyone is talking to everyone."
Mirror Staff Writer William Kibler is at 949-7038.