Editor's note: This blog is part of Fiscal Fitness, a regular H&HN series exploring the cost containment strategies hospitals are employing in response to reimbursement pressures and an uncertain economic climate. Read more at our Fiscal Fitness page.

While some providers are still uncertain on how to adapt to a transformational moment in health care, five New Hampshire hospitals are focusing outward. They've formed what they call a "visionary" partnership that's expected to save millions in the coming years.

The CEOs from the Granite State organizations already had been talking to each other for months, if not years. But their partnership really came to a head after the passage of the Affordable Care Act in March 2010, and its mandates to stop just treating the sick and start improving the population's overall health.

"It wasn't going to be about business as usual, not about recycling old models," says Rachel Rowe, executive director of the collaborative, the Granite Healthcare Network. "They're getting squeezed by the feds, squeezed by the state, squeezed by commercial payers, and they needed to figure out how to manage population health and take costs out of the system."

In December 2010, four of the five hospitals established the Granite Shield Insurance exchange, which formed a larger pool for their medical malpractice insurance, saving "hundreds of thousands" of dollars each year, according to Rowe.

The move paved the way for working together still further, she adds. In April 2011, they launched Granite Healthcare Network with a fifth hospital partner. The goal: to share in costs and take advantage of economies of scale. The network members are concentrated mostly in the south-central, most populous portion of the state and include Concord Hospital, Elliot Health System, LRGHealthcare, Southern New Hampshire Health System and Wentworth-Douglass Hospital. Together, they have almost 1,000 employed physicians, more than 9,000 full-time employees, and a coverage area encompassing almost 50 communities and more than 500,000 New Hampshire residents.

Granite recently contracted with Utah-based reference lab, ARUP Laboratories, which tests for such things as lead, allergies and genetic disorders. By buying the services together, they got discounted pricing that will save some $5 million over the next five years, Rowe says.

Last fall, the network signed on with Verisk Health, a software provider. None of the members could have afforded that service on their own, but by splitting the cost five ways, they now can access data to measure cost and quality of care across the system, assessing any possible risks, and targeting opportunities to operate more effectively and efficiently.

The data is key to meet the goal of managing the health of the entire state's population, rather than simply handling one admission at a time, says Thomas Wilhelmsen, president and CEO of the 188-bed Southern New Hampshire Health System in Nashua.

"If the system is changing away from fee for service and there's going to be some additional risk assumed by the providers, then we better have the information structure to manage the medical care better," he says.

Granite's strategy involves combining medical, pharmaceutical and eligibility data into one database, Rowe says. The hospitals then can identify high-risk patients with multiple conditions, and identify gaps in care that affect quality and costs. The five providers use the information to better hone their medical management and care coordination, leading to enhanced population health and improved performance.

Those involved did not say how much it cost to start up the Granite Healthcare Network, or to run an office with a dedicated staff and executive director. But they emphasized that the bill is far shy of the millions the network will save them.

Unlike most of the other hospitals in the network, 137-bed, two hospital LRGHealthcare's service area is primarily rural. CEO Thomas Clairmont says his organization might not have the resources and layers of leadership that the bigger guys have, so he relishes the chance to occasionally bring their CMOs together and bounce ideas off them.

On the other end of the spectrum is Elliot Health System, a 240-bed facility located in Manchester, the most populous city in the state. Elliot and fellow network member, 238-bed Concord Hospital, have applied to form a Medicare-focused accountable care organization and they hope to find out if they're approved by July 1, says President and CEO Doug Dean.

Dean says the network provides the benefits of a merger, without the headaches. While there is some overlap in their service areas, the hospitals don't consider themselves competitors, and they strictly adhere to antitrust laws. Keeping a competitive mindset would have been foolish for the five New Hampshire health systems, Dean says.

"We all recognized that to compete is, in the long term, very much contrary to our best interests, and to collaborate in bringing down our cost of operations is about the only way we'll all survive," he says.

Contact Marty Stempniak at mstempniak@healthforum.com.