Are you a health leader?
Qualify for a free subscription to HealthLeaders magazine.
Qualify for a free subscription to HealthLeaders magazine.
The healthcare customer is in large part responsible for the outpatient boom. Patients have latched on to the convenience made possible by improved clinical technologies. Minimally invasive and interventional procedures have decreased the need for lengthy hospital stays, and high-tech imaging equipment has moved out of hospital corridors and into easier-access locations. Be it a freestanding facility in the suburbs or a hospital-based center on a downtown campus, the idea of avoiding the hospital is an attractive one. Clinicians, too, enjoy the freedom and flexibility of the ambulatory setting, which runs more like a 9-to-5 business.
Many hospitals were slow to react at first because outpatient care had little impact on volumes and finances. But Brian Silverstein, M.D., vice president of Chicago-based research and consulting firm Sg2, says many hospitals have put outpatient services on the front burner. The hospital profit base 10 years ago was 64 percent inpatient and 35 percent out, he says. “Today, that’s flipped,” he says.
Clinical practice changes and technological innovations that allow more services to be performed outside the hospital have prompted the Centers for Medicare & Medicaid Services to propagate the trend with higher reimbursement rates. “A slow but significant force was gaining momentum as these things coalesced,” says Silverstein, “and at the point hospitals started to appreciate that business was going outside, it was already gone.”
With clinical and technological advances in fields ranging from cardiology and orthopedics to gastroenterology and oncology, along with improvements in sedation and anesthesia-monitoring techniques, the outpatient push is showing little sign of slowing. Despite the pressure to act fast, hospitals should heed subtle operational and market changes that may affect the way outpatient services are delivered in the near future.
Increasing integration ahead
Many hospitals have been challenged by physician-owned outpatient services in office-based or freestanding settings that create tough outpatient competition for hospital-based facilities. Physician-run centers are not going away, but circumstances are making closer relationships with hospitals more enticing.
One reason for the shift is the increasing cost of technology. While some large specialty groups can continue purchasing equipment without a hospital partner, Silverstein says many may turn to larger systems to offset some of the financial burden. “When taking care of the patient requires an additional piece of equipment that can be used for other things, it requires coordination, so the value of doing the service as a standalone is going to be less,” Silverstein says.
Reimbursement changes are also afoot as CMS seeks to equalize the effect of its earlier push for outpatient care. “CMS is moving toward more of a site-less payment,” says Silverstein, meaning that regardless of where a procedure is performed, the rate of compensation remains the same. Although the change won’t reduce overall profitability, some margins will likely be squeezed, he says.
A final reason for integration’s upswing comes from the increasing complexity of outpatient procedures. “There’s a balance between doing more procedures in the community for convenience and being close to high-tech services and additional medical staff at the hospital in case there’s a problem,” says Warren Chandler, senior vice president for strategic planning and business development at 492-staffed-bed St. Vincent’s HealthCare in Jacksonville, Fla. St. Vincent’s has focused it’s outpatient efforts on hospital-based care and is in the middle of a four-year, $25 million to $30 million “patient access redesign” project that will expand and assemble outpatient services on the hospital’s first two floors.
Wave of convenience
As the active baby boomer population ages and obesity continues to wear out joints and hearts, the number of people wanting care in an outpatient setting will climb. While inpatient care decisions are typically based on physician recommendations, outpatient decisions are grounded in convenience. The hospital that can’t provide streamlined outpatient services has a strike against it from the start. “Well-organized ambulatory services can be the front door to everything you do clinically,” says Trent C. Smith, senior vice president and COO for ambulatory services at eight-hospital University of Maryland Medical System. “On a typical day, you’ll treat 10 times the patients on an outpatient basis that you will inpatient, so you want to make sure that’s a very positive experience.”
On the downtown Baltimore campus of the system’s flagship hospital, the University of Maryland Medical Center, construction is under way on a $328 million, eight-story ambulatory care center that will centralize the facility’s scattered outpatient sites. “As ambulatory grows you tend to shoehorn services in any space you can find,” says Smith. The result was 30 outpatient centers in 13 different sites on campus, which was bad for service integration and inconvenient for patients.
The new center is designed around the “clinical neighborhood” concept, which organizes services based on how patients use them, rather than the traditional medical hierarchy. “It makes it convenient for the patient who might need different types of related services during one visit or a sequence of visits,” says Smith.
Morton Plant Mease’s Couris cites the growth of health savings accounts as another factor that will drive patients to take their time shopping around for care. “Anybody providing services will need to be able to respond to that,” says Couris, who points out that his system is working on strategies like pricing transparency to address consumer-driven outpatient care.
In the future, general outpatient care may lose business to centers offering more directed services. This shift is due in part to convenience, but also to the ability of a disease-specific facility to offer greater value and a higher standard of specialty care around a chronic illness or disease.
“You’re going to see more disease-based management—whether it’s breast cancer or back pain—where you take care of the person from chronic illness through wellness,” says Couris. For example, rather than provide a service that is limited to diagnosing cancer, as many outpatient centers provide today, Silverstein predicts centers that can follow diagnosis with medical, radiation and surgical oncology in one location will prevail.
As more surgical procedures are approved for outpatient settings, cancer care is one area of growth, but chronic illnesses like diabetes and obesity are other possibilities. Silverstein says the trend hinges on diseases that are compatible with elective treatment where time is less of an issue and people can investigate their choices. The more customization of care a facility is able to market, the greater the reach. “In some cases, if the patient is in a geographical area that doesn’t have the density to support a disease-specific center or program, people might be willing to travel further to a center that is specialized on a particular disease,” says Silverstein.
Kara Olsen is a staff writer with HealthLeaders magazine and managing editor of HealthLeaders Online News. She may be reached at firstname.lastname@example.org.
Eight Outpatient Pitfalls
Outpatient services are only as strong as their ability to turn a profit. Avoid making these mistakes as your ambulatory business grows:
1. Failure to anticipate future changes in payment and reimbursement. This can lead to overestimation of profits or underestimation of market opportunities, Brian Silverstein of the research and consulting firm Sg2 says.
2. Assuming a hospital and outpatient center can be managed the same way. Higher acuity patients and diverse departments equal greater complexity for hospitals, says Morton Plant North Bay Hospital COO John Couris, but competitive ambulatory markets require flexibility and quickness.
3. Slow reaction to customer concerns. If you don’t fix a service issue quickly, the patient has plenty of options and will take his business elsewhere, says Couris.
4. Not accounting for changing technologies. New treatments create new opportunities, so keep an eye on the future of the practice, says Silverstein.
5. Not asking the docs, especially those who won’t use the service. Physicians should be leading the hospital toward the tech and procedures that make sense, says Warren Chandler of St. Vincent’s HealthCare, but also bring to the table those whose departments may face cuts as you spend more on outpatient.
6. Trying to make one size fit all. Don’t add services without building around community needs, physician desires and the competitive climate, says Couris. Tailoring services and the size and scope of the facility allows for incremental growth along with the community.
7. Underestimating the competition. No matter what kind of services you offer, you’re competing against entrepreneurs who “eat, drink and sleep their service line,” says Couris. Your service should exceed expectations.
8. Thinking a new facility guarantees patients. Building a big box with a lot of fixed cost without the volume and revenue to offset it could potentially be a drain on your organization, says Couris.
- $6.4B Henry Ford, Beaumont Merger Failed on Cultural Hurdles
- House Lawmakers Grill CMS Over Health Exchange Navigators
- Don't Let Nurses Sink Your Bottom Line
- Fortunately, Angelina Jolie Isn't On Medicare
- How Chargemaster Data May Affect Hospital Revenue
- Insurer's App Aims to Lower Healthcare Costs, Securely
- ED Physicians Key to Half of Hospital Admissions
- Primary Care Docs Average More Hospital Revenue Than Specialists
- Uncompensated Care Faces a Double Hit in Some States
- Hospital Pricing Transparency a Marketing Game Changer