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Outpatient Care Expansion Comes Under Scrutiny

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   February 01, 2012

This article appears in the January 2012 issue of HealthLeaders magazine.

In Southern California, the 223-bed Saint John's Health Center overlaps competitive space with hospitals more than twice its size. The hospital system decided there was one way to improve its competitive edge: improve its outpatient services.

The Santa Monica hospital in 2011 built a new ambulatory surgery center, ensured that its patients had easy access, and delivered flexible scheduling options. At the same time, it recruited physicians, some from the local competition, which included the 958-bed Cedars-Sinai Medical Center in Beverly Hills and the 520-bed Ronald Reagan UCLA Medical Center in Los Angeles, 13 miles away.

"Surgery centers will be on the radar more and more because of our efficiencies," says Kevin Streeter, director of Saint John's ASC. "When I hear people say there are too many surgery centers, I have to chuckle. There's always room for growth. It's a business, and it will keep moving."

Indeed, the drive to outpatient care has many hospital system leaders with their feet on the accelerators. These systems are developing more ambulatory surgery and imaging outpatient programs. "This has been the evolving trend; there are just a lot more modalities that can be provided in an outpatient setting," says LaVone Arthur, vice president of business development for the more than 1,000-licensed-bed Baylor Health Care System in Dallas.

Still, some leaders are considering evolving economic trends and the local demographics, and insisting that they may need to step back and consolidate their outpatient programs for cost savings. Even the most ardent proponents of outpatient care say its pace may slow down, depending on a local community's need for integrated care and the specific demand for multidisciplinary approaches.

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Steve Geidt, CEO of the 313-bed Saddleback Memorial Medical Center in San Clemente, CA, which is an 80-minute freeway drive from Saint John's, says the hospital is developing new imaging outpatient programs to meet the competition and improve patient access. "We're going to push everything we can to freestanding because they have a lower unit price," says Geidt, whose hospital system, MemorialCare Health System, purchased an imaging center from a physician group in 2010 to increase imaging capability for its patients, and increase its patient traffic in heavily competitive Orange County. Saddleback also has a location in Laguna Hills in Orange County.

But Geidt is not without some trepidation. As he looks ahead for outpatient centers, he asks, "Where do all the components fit in? That's our challenge. There's a lot of movement in the marketplace, a lot of the freestanding centers are looking and saying, 'This is a good time for a sale or a merger.' But the business model won't sustain a whole lot of freestanding centers. Ultimately, we are going to have a great deal more consolidation."

"Like most systems, we evaluate where the right place is to put the service," Edward Karlovich, CFO of the hospital and community services division for UPMC, says of outpatient planning. "You have to balance that with the economic realities of the world we all live in. You will see situations where we have created outpatient imaging facilities or surgery centers tied to our hospitals. And then, in other geographic areas, we have not done the same thing. Anybody who's looking at this as one broad strategy to apply will find it very difficult."

Those demographic forces are certainly different for each locale. While Saddlebrook is tentatively moving forward with some plans, Saint John's believes it had no choice but to jump into the outpatient arena in a competitive market.

Joe Cantlupe is a senior editor with HealthLeaders Media Online.

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