Penrose gaining ground in hospital war

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While Memorial Health System is working to settle its governance issues, Penrose St. Francis Health Services is forging ahead with a strategy to grow its regional market share.

It’s a different approach than the hospital threatened to take last fall when competitor Memorial Health System was selecting a new organization to lease and manage it.

At that time, Penrose CEO Margaret Sabin said the millions of dollars paid to lease Memorial would spark a “medical arms race,” in which local health costs would skyrocket and access to care would diminish.

Penrose sounded the war cry, saying it would be ready to compete by spending more on technology and thereby increasing prices, too.

However, Penrose is now relying on its relationship with Centura Health to establish itself in additional communities.

“We’re going to do what we’ve always done, focus on partnerships, health care and expanding our reach throughout the region,” said COO Jamie Smith. “We’re going to let the University Hospital and Memorial do what they’re going to do.”

Those objectives are listed in Penrose’s competitive play book, which makes no mention of price hikes or costly technological purchases.

While Memorial’s been mired in task forces, citizens’ groups and city council discussions, Penrose says it has been building partnerships with hospitals as far south as Alamosa, as far west as Salida and far east as Goodland, Kansas. More partnerships will come, Smith said.

Part of Penrose’s strength lies in the fact that its parent company, Centura Health, is the largest nonprofit health care system in Colorado and is affiliated with the nation’s largest nonprofit health care system, Catholic Health Initiatives.

“It works well for us, these networks,” Smith said. “For instance, if someone in Alamosa has cancer, they can be treated at St. Mary Corwin’s (in Pueblo). If they need a specialist, they can come to Penrose. And if they need a transplant, they can go to Denver. We can care for them through these partnerships, no matter what their needs are.”

UCH hopes for a similar strategy with Memorial.

The University of Colorado Hospital has expanded to the northern part of the state by creating a partnership with Poudre Valley Hospital System in Fort Collins, and Memorial would operate as a post for expansion to the southern part of the state.

Penrose has already established itself here and further south, and has also signed agreements with community hospitals in Del Norte, Kremmling and Granby.

“We believe that community collaborations are the way health care systems are going to last,” Smith said. “The hospital industry is a mature industry, so we’re not going to see earth-shattering changes in policy — with the exception of technology that changes the way we work.”

Centura launched a strategic plan a few years ago, called Centura Health 2020. That plan is the framework for Penrose’s own success, Smith said.

“First of all, we talk about moving care upstream. To us, that means focuses on wellness and preventive care,” he said. “Secondly, we’re strengthening the foundations. That means focusing on operations and controlling costs as much as we can with the resources that we have.”

Finally, Smith said, the hospital system is focusing on growing systems of care — and that’s where extending across the eastern plains and to the western slope will become key.

It’s also the reason Penrose is reaching out to doctors. Smith said that the physician affiliations are a big part of their success — even Moody’s has acknowledged that Penrose is gaining market share.

And even though that market share is growing, it isn’t what it could have been, Smith said, because Memorial’s ownership negotiations have driven patients out of the local market.

“The market share is shrinking,” he said. “More people seem to be going to Denver — and we attribute that to all the uncertainty at Memorial.”

The fight for expanded market share is a shift in focus on a pricing war, which Penrose called attention to when it was lobbying for an independent, nonprofit Memorial that would collaborate with Penrose.

Still, though, the pricing battle could likely flare up again as expansion competition heats up.

And, the expectation that UHC and Memorial will raise prices hasn’t gone away.

“This bucket of money doesn’t drop out of the sky,” Penrose CEO Margaret Sabin said last fall. “They’ll recoup their costs.”