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Old labels don’t describe this ‘hybrid’

What, exactly, could one call the partnership proposed by University of South Florida and Lakeland Regional Medical Center, which the boards of both institutions will vote on in a few days?

It’s easier to say what it’s not.

It is not a typical affiliation between a medical school and a teaching hospital. It’s much more than that. But it’s not a buyout or takeover; both institutions maintain their own boards, doctors, and patients.

If both boards agree, they will form a new non-profit corporation called USF Health System Inc. The system will transform LRMC into a major teaching hospital for USF, but will also serve as a financial vehicle to take advantage of coming changes in the health-care payment system.

Dr. Stephen Klasko, USF Health’s CEO, dreamed up the deal, which he calls a “hybrid.” In presenting it Thursday to the USF trustees’ committee on health-- which unanimously voted to recommend it to the full board -- Klasko also called it “USF Health 3.0.”

To an outsider, it looks like a joint venture between two non-profits, with Medicare supplying a lot of the capital.

Some questions about the deal have no answers yet, but here is the information released so far:

How would the USF Health System be set up?

Technically it would be a “University Health Services Support Organization, “as described in Florida statutes.

USF would have a slight edge on the 11-member board. Four members would be designated by the Lakeland Regional board, and four members by the USF board. The USF Health CEO (currently Klasko) would hold one seat and nominate two “nationally recognized health care leaders” for the others, subject to consent of the board.

Who pays for this?

Taxpayers, because Medicare pays teaching hospitals to train up to 200 medical residents. The money will benefit both the hospital and USF.

Luckily for taxpayers, it shouldn’t be a huge expense, since there is no construction required. Also, residents’ salaries aren’t high.

Why form a corporation?

It enables them to compete for insurance contracts and bonus payments from the government by providing higher-quality care than the norm at lower cost. The corporation will be able to compete for “bundled payments,” in which insurers pay a flat fee per episode of illness, leaving the doctors and hospitals to divvy up the money.

“Once we get to a bundled-payment model,” Klasko said, “we’ll be able to compete with anybody.”

How will the income be divvied up?
Details aren’t available, but there will be a “threshold” beyond which excess revenue to LRMC will be shared with USF.

What happens to USF’s current teaching hospitals?

Nothing. USF faculty and residents would continue to practice and teach at Tampa General and other affiliated hospitals. Klasko said they are invited to join the new USF Health System.

However, several are already part of other health systems.

What happens to USF’s Physician Group?

The multispecialty practice based on the Tampa campus, about 450 physicians, will continue to see patients there. Physicians in Tampa Bay, Lakeland and The Villages would be invited to join a “community component” of the practice.

What if the partnership doesn’t work out?

Either side can terminate the agreement without cause at the 3-year and 10-year anniversary.

What’s the time line?

USF’s board decides Monday; Lakeland Regional Health System’s board will vote before the end of the month. The corporation is to be in effect by March 31, 2013. The residency program would be in operation by 2015.

Would the new system help or hurt citizens?

Polk County and surrounding areas would benefit from the influx of young doctors-in-training, especially if some of them decide to settle in the area after completing their residency.

Why did USF choose Lakeland Regional?

LRMC is one of the few large independent hospitals that has not yet become part of a health system. It’s one of the busiest hospitals in Florida, with the largest emergency-room caseload in the state. And its new management team, led by CEO Elaine Thompson, has a zeal for efficiency; in one year, it boosted operating margins from less than ½ of 1 percent to 6.8 percent and cut the time to discharge or a bed in the emergency department from eight hours to three.

Also, LRMC comes to this marriage with a potential dowry. Since it does not have a residency program, it can receive Medicare funds to start one.

Why did LRMC pick USF?

The hospital had a long line of suitors, including University of Florida and University of Central Florida. As CEO Thompson joked, “I’ve never felt so pretty in my life, with so many men coming to ask me for a date.”

Many of the physicians on staff at LRMC graduated from USF or trained there and thus have a natural affinity for the school, she said.

Thompson, who holds a PhD in engineering, shares Klasko’s zeal for stamping out inefficiency and shaking up the status quo.

Is this health system limited to USF and LRMC?

No. Klasko emphasized that he wants hospitals and physician groups from around the state to join the health system. He said he expects to propose addition of a Tampa Bay physician group soon.

--Health News Florida is journalism for a healthy state. As a part of WUSF Public Media, it provides in-depth coverage of health issues and policy.  Question? Comment? Contact Carol Gentry, Editor, at  727-410-3266  or 

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.