Health systems retreat from partnerships to control costs, refocus on core care

Editor's Note

Some health systems are cutting ties with long-standing partners to conserve resources, brace for financial uncertainty, and prioritize core clinical services, Modern Healthcare June 26 reports. With looming federal reimbursement cuts and increasing economic pressures, providers are reassessing the value and sustainability of affiliations formed during more stable times.

The article reports the below recent “breakups”:

• UW Medicine and Valley Medical Center in Washington ended a 14-year clinical alliance
• Adventist HealthCare and Howard University in Maryland dissolved a hospital management agreement
• Novant Health in North Carolina sold its minority share in a Medicare Advantage plan to Cone Health.

According to the CEO of Baptist Health, which recently exited a partnership with UF Health, health systems are sharpening their strategic planning and becoming more disciplined in assessing collaborations. Terminating affiliations can be a fast way to cut costs as systems anticipate funding pressures tied to budget reconciliation efforts, the outlet noted.

According to Valley Medical Center, changing care delivery trends—such as the shift to outpatient and community-based services—have contributed to reevaluating old partnerships. Executives quoted in the article noted managing joint ventures requires intensive coordination, clearly defined responsibilities, and aligned incentives, all of which can become burdensome when economic headwinds intensify.

Some affiliations, especially those involving revenue-sharing or management responsibilities, may no longer be financially viable. Juniper Advisory’s Jordan Shields explained that in stressful fiscal environments, splitting income or allocating executive oversight externally may detract from a system’s core operational priorities.

While partnerships are not disappearing entirely, they are being redefined. The article also points to a changing landscape in Medicare Advantage (MA). Once seen as a high-return opportunity, these health plan ventures are increasingly being considered as costly distractions. A health policy professor at Harvard University noted that underperforming MA plans can drain hospital resources, pushing systems to divest rather than double down.