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Emerging Service Lines

Elyas Bakhtiari, for HealthLeaders Magazine, December 8, 2009
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Many physician offices can do basic wound dressing, but modalities like hyperbaric medicine and ultrasonic sound wave therapy keep patients coming in multiple times a week for treatment. This not only boosts volume and increases margins, but the additional services are fodder for marketing to physicians, who will only refer to a clinic that can provide more advanced treatments than what is available in their own office.

"It was always a struggle based on patient volume until we added more modalities that can generate revenue and have a pretty good margin. Now we're able to maintain more financial stability," says Moore. "You have to look at comprehensive approach. If you just have a doctor dressing wounds, you'll struggle based on your volume."

Emerging Service Line No. 3: Sleep medicine
Like wound care, sleep medicine is a niche service line that has already been around for a while at some hospitals. St. Joseph Hospital, a 525-bed hospital in Orange, CA, opened a two-bed sleep center in 1990 and has since grown it to an eight-bed facility that treats approximately 2,000 patients per year for sleep-related disorders, of which about 80% are sleep apnea.

But the market is still emerging and evolving in many areas. Since the St. Joseph center opened nearly 20 years ago, sleep medicine has become a fairly competitive field due to its relatively low startup costs and high profit margins, says Kevin London, VP of operations for the hospital. Physicians and private companies are increasingly opening small sleep clinics that are competing with the hospital-based accredited facilities, and often able to offer lower prices because of fewer overhead expenses.

That makes differentiation a priority. Accreditation helps, particularly when it comes to convincing primary care physicians where to send referrals. But St. Joseph also tries to outdo freestanding sleep clinics when it comes to customer service. "By and large, hospitals tend to have a greater overhead expense. We seldom can win the war based on price only. So frankly, it really comes down to the quality. We try to win the war based on service because it's hard to compete with freestanding centers who have ability to price differently than we do."

That also entails marketing to referring physicians, and the neurologist and psychologist who run the clinic offer educational seminars and other engagement opportunities to connect with primary care physicians, who provide the majority of referrals to the center.

The future of sleep medicine still looks promising, although some potentially disruptive changes lie ahead. The Office of Inspector General has targeted sleep medicine reimbursement in its Work Plan since 2007, in part because Medicare payments for sleep medicine rose 174% between 2001 and 2004. If the reimbursement is cut, sleep medicine may become less profitable and less valuable as a freestanding operation.

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