Amid debate and uncertainty over health care, Mayo expands

Mayo Clinic
The Mayo Clinic in Rochester, Minn. The Mayo Clinic has increasingly affiliated with smaller medical centers in and out of state through its care network.
MPR Photo/Tom Weber

There's a lot of jockeying for position in the health care market as medical centers prepare to implement the provisions of the federal Affordable Care Act.

The debate over the law has created a lot of uncertainty in the market, and many health care providers are responding by linking with each other to manage the risk.

The relationships range from outright mergers and acquisitions to more flexible relationships, called affiliations. Rochester-based Mayo Clinic has increasingly affiliated with smaller medical centers in and out of state through its Mayo Clinic Care Network.

"I've done more merger affiliations in the last 24 months than previously done in 23 years" as a consultant, said James Berarducci, a health care consultant in Minnesota for global management firm Kurt Salmon, who has done work for Mayo. "The issue now is, this isn't all about merging assets or being acquired; there are newer, different relationships that are being created."

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Berarducci's firm has about 100 health care clients. He said Mayo Clinic's Care Network is a prime example of the newer relationships.

For a negotiated fee, or what Mayo officials call a subscription, affiliates receive direct access to Mayo's research and expertise in how to best care for patients. For example, Mayo doctors can render second opinions within about two days for an affiliate's particularly complex cases.

The network has six affiliates including Altru Health System and Coburn Cancer Center in Minnesota. It also has affiliates in Arizona, Michigan and Missouri.

Dr. Mark Laney, CEO of Mayo Clinic's Missouri affiliate, Heartland Health, said being a member of the network allows the regional medical center to keep its patients closer to home while having access to world class researchers and physicians.

"It's an incredible resource that we could never reproduce locally and have that literally a click away at our fingertips really helps us practice better medicine," Laney said.

University of Minnesota health management professor Daniel Zismer said it's becoming increasingly difficult for health centers such as Heartland to remain independent when market forces are pushing them to consolidate.

"Many of them desperately want to stay independent in the marketplace," Zismer said. "So while they're not being bought by Mayo per se they are linking with Mayo and perhaps they believe that will help them to be autonomous."

Neither Heartland nor Mayo officials would reveal how much Heartland pays Mayo to be an affiliate. But in addition to added revenue, Mayo can expand its geographical footprint beyond its three campuses with health systems that share its collaborative philosophy, said Dr. David Hayes, medical director of the Mayo Clinic Care Network.

"We need to have more of a reach and to have some structured links to a broader group of hospitals and medical centers throughout the country," Hayes said.

Through its network, Mayo can leverage the investments it's already made, said Meredith Rosenthal, a professor of health economics and policy at Harvard University.

"There's likely to be growing demand and Mayo can meet that demand and do very well without having to build new infrastructure," Rosenthal said. "It's a way they can continue to grow their reputation nationally and essentially enter a new line of business."

The affiliates benefit by being associated with the Mayo Clinic Care Network.

That positive halo effect can give a center such as Heartland a competitive edge, said John Kimberly, a professor of health care management at the Wharton School of Business. But he said the affiliation is not without risk for Mayo.

"If they sign up with some providers who don't maintain sufficient levels of quality then the Mayo brand suffers by association," Kimberly said.

Hayes says Mayo is cautious about who it decides to affiliate with, adding that its partners must meet high quality standards. Hayes said Mayo is considering other affiliates including outside the United States.