The Cleveland Clinic has national and international clout, including a strong reputation for high quality healthcare. But hospital consolidation in Ohio could challenge the world-renowned system, which is facing intense competition from powerful health systems, two in particular, that have strengthened their integrated delivery networks in recent years and will likely give Cleveland Clinic a run for its money in its home state.

This scenario is not limited to Ohio. It is part of a developing trend: As health systems transform into massive integrated delivery networks, they will likely prove to be formidable competitors for systems like Cleveland Clinic that have long enjoyed reputations as leaders in healthcare. These highly regarded providers built their reputations on their level of integration and high quality care. But now most hospitals and health systems are moving in that direction, so the Cleveland Clinics of the world must find a way to maintain their competitive edge, even though the differences between them and other systems are becoming less obvious.

And although these nationally-renowned systems often attract patients from across the country and around the world, patients from their home states are usually the core of their business. Ohio, for example, is still critical for Cleveland Clinic since 77 percent of its patients are from the seven-county Cleveland market and another 17 percent are from other regions of the state, according to the most recent State of the Clinic report.

Last year, Cleveland Clinic made headlines when it announced a strategic affiliation with Community Health Systems, the nation's largest for-profit hospital chain by number of hospitals. The partnership aligns academic medicine with the private sector and provides an opportunity for Cleveland Clinic to expand its influence across the country to more than 100 CHS hospitals. A few months after the affiliation announcement, Cleveland Clinic and CHS made public their intent to jointly acquire Akron General Health System and transition it to a for-profit hospital. However, the deal fell through in early 2014, and Cleveland Clinic has now announced that it will acquire a minority stake in Akron General without Community Health Systems.

The Cleveland market's health systems are already highly consolidated, and Cleveland Clinic's bid for Akron General will only increase the consolidation level. The deal will also strengthen Cleveland Clinic's position in the northeast Ohio region, where the system has seen increasing competition in recent years from its long-standing rival, University Hospitals, and emerging rival Mercy Health (formerly Catholic Health Partners).  If the deal for Akron General is finalized, Cleveland Clinic will directly compete with either UH or Mercy Health in three Ohio metro areas: Cleveland, Akron, and Toledo.

In the past, Mercy Health, despite being the largest health system statewide, didn't have much stake in northeast Ohio, which is where Cleveland Clinic dominates. But Mercy Health has expanded its presence there. In two separate transactions that were finalized in late 2013, Mercy Health purchased a minority stake in Summa Health System in Akron and acquired Kaiser Permanente's northeastern Ohio operations. So Cleveland Clinic will compete directly with Mercy Health in the Akron market if the Clinic's minority-ownership deal with Akron General goes through, and in the Toledo market, where Cleveland Clinic has an affiliation with ProMedica Health System, whose sole rival is Mercy Health's Mercy system.

In addition, UH and Mercy Health have a strong relationship and have increased their alliance in recent years, which adds yet another layer to the competition with the Cleveland Clinic. UH and Mercy Health have a cancer care partnership in Lorain County and formed a statewide collaborative known as Health Innovations Ohio with three of the other largest health systems in the state. And under Mercy Health's ownership, Kaiser Permanente patients are now referred to University Hospitals for acute care and surgery, replacing Kaiser's previous referral contract with Cleveland Clinic.

As health systems move toward a greater level of integration, systems such as Cleveland Clinic need to find a way to maintain their competitive advantage, especially in local markets where their competitors are strengthening their reputations and becoming high-quality integrated delivery networks, making the differences between them less apparent.

Follow AnnJeanette Colwell on Twitter @AJColwellDRG

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