"People are becoming much more savvy about the ultimate financial responsibility and the high deductibles, and it's the outpatient choices where they put that information to use," Bogen says. "We are certainly seeing the impact of that here on Long Island, with patients moving away from hospital-based outpatient ambulatory services to our freestanding counterparts."
South Nassau's efforts to follow patient trends in the past few years actually have backfired because of the move to consumerism, he says. With all the experts predicting that hospital admissions would decrease as patients gravitated more toward ambulatory care, South Nassau negotiated managed care contracts that would take advantage of that move with high-margin ambulatory care fees.
"What has happened is that we have substantially outpriced ourselves in the market, in relation to freestanding, primarily physician-owned and -operated providers of ambulatory care," Bogen explains. "And now insurance carriers have put in benefit designs that penalize recipients who prefer to use hospital-based ambulatory services. So the quandary we have in terms of redoing our managed care rate structure is that we could bring down our rates, but if the benefit design remains to penalize those using our facilities, we aren't accomplishing anything."
The insurers have to give a little if the hospital lowers its rates, so South Nassau is working with insurance companies to develop shared savings relationships that would soften the impact of patients continuing to move to freestanding ambulatory care. The hospital would share in the savings generated by the managed care plan patients choosing more cost-effective care in freestanding facilities, helping to compensate for the hospital's loss in revenue. Talks also are underway to establish a "skinny network" in which the insurer agrees to exempt South Nassau from the high deductibles that patients otherwise would pay when choosing the hospital over a freestanding facility.
Threats from urgent care, drugstore clinics
The damage from lost patients may be mitigated by the glut of urgent care centers on Long Island, which was spurred by the constant search for more cost-effective care outside the hospital. With a new one popping up in seemingly any vacant space, South Nassau leaders initially saw them as formidable competition that promised to save managed care providers money over patients going to a hospital emergency department, so the insurers were willing to pay physicians more than the standard private practice fee schedule. That led many local physicians to sign on with the urgent care centers, which left the community with fewer primary care physicians.
"So when they couldn't find a primary care doctor, people ended up using the urgent care as their primary care," Bogen explains. "The insurers end up paying more for the patient to see the doctor in an urgent care setting than if that doctor was available for a regular primary care visit. Now we're seeing the insurers go back to paying the primary care practice rate, and many of the urgent care operations can't sustain themselves on that."
As that threat recedes, another serious challenge for South Nassau is the CVS pharmacy directly across the street. CVS Health—which reported 2014 net revenues of $139 billion, and net operating profit of $8.8 billion—can undercut the hospital on prices for basic services at the chain's Minute Clinics because it is willing to lose money on a flu shot if it means getting a customer in the door to buy retail goods and use the pharmacy, Bogen says. The idea of setting up a similar clinic has crossed his mind, but Bogen notes that larger healthcare systems have tried that and ended up closing or subleasing the clinics because they were not profitable.
South Nassau also has gone to social media to slow the loss of patients seeking a better price. Realizing that, although it had a good Web presence, it wasn't very active on social media, hospital leaders brought in a new hire at the senior vice president level to focus on improving the hospital's exposure on Facebook, Twitter, and other social media.
During 2015, the hospital made a relatively small investment in a Facebook advertising campaign that paid big dividends in its ability to reach a significantly greater core audience. By the end of 2014, the hospital had collected about 970 "likes" for its page, and through 2015, that number swelled to 10,000 likes. This dramatically increased its engagement and reach, Bogen says, with weekly total reach skyrocketing from 26,000 to more than 70,000. The campaign was instrumental in developing awareness as the hospital launched a new branding campaign in 2015 with newspaper, cable, and spot TV. Of particular focus was generating original and organic content on an almost-daily basis, which has been key to effectively engaging the audience.
Gregory A. Freeman is a contributing writer for HealthLeaders.