Inpatient demand not dead
Palomar Health's president and CEO, Michael Covert, is still questioned about the wisdom of opening an entirely new hospital for the San Diego–based health system's 288-staffed-bed Escondido campus in 2012 despite concerns that inpatient care is on a downtrend.
The system has faced tough questions as the expected patient demand has so far failed to fully materialize, but Covert is convinced it was the right move. Besides, the system was trying to meet California's strict seismic standards for hospitals (compliance deadlines for which have since been extended).
"What we're seeing in the hospital today is continued emphasis on complex care as well as palliative and end-of-life care," Covert says. "That's still the big bulk of dollars spent on healthcare. Our success will hinge on our ability to manage that in the future, so I'm not envisioning less use of the hospital. I would define it as tighter, with lower length of stay, better throughput, and better management of care outside of the hospital."
Another big reason for building a new hospital was that the competing proposal, a renovation of the existing facility, would have meant removing a third of the hospital's staff from service during the renovation period. Also, the decision to build the new $956 million hospital was reached during San Diego County's economic boom years of the early to mid-2000s, when projected population growth was between 6% and 12% compared to the current 1%–2%.
Covert says volume will still grow due to population growth, just not as strongly as projected when the decision to build was made. The system initially experienced losses when the new facility opened in 2012, and some layoffs followed in 2013, but even amid high startup costs and disappointing volume projections, patient volume has grown.
Bond insurer Fitch affirmed Palomar Health's A+ bond rating in December 2013, citing as reasons to maintain the key rating the system's leading market share and management efforts to stabilize the system's finances following high expenses associated with the transition to the new facility. Despite the challenges since its conception, Covert says the new facility gave Palomar a one-shot opportunity to design with evidence-based principles in mind.
"We had been looking at evidence-based-design principles associated with The Pebble Project [a design collaborative of the Center for Health Design that includes healthcare organizations, architects, and other industry partners]. But no one had done this to the size and magnitude in one place. We created that fabled hospital."
The hospital incorporates solutions based on the latest evidence on the health effects of lighting, noise, and sustainability, Covert says, adding that it was done not only as a means to improve care but in anticipation of flexibility for the future.
"We knew this one shot would have to accommodate a lot of the citizens' needs for years to come," he says. "We'll see a lot of consolidation of services, greater connectivity among health systems, and some shrinking of services, yet the demands of communities will still be as great as they've been in the past."
This article appears in the May 2014 issue of HealthLeaders magazine.