With diminishing reimbursements and unknowns surrounding healthcare reform, hospital systems are taking a look at the future of their facilities and making some very strategic decisions that by all means could offer a bit more of a financial guarantee.
A recent study by the Center for Studying Health System Change (HSC) that was published in the April edition of health policy journal Health Affairs highlights what it’s calling the next chapter in hospital competition: targeted geographic expansion into new markets with well-insured people.
Funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform, the study “Hospitals’ Geographic Expansion in Quest of Well-Insured Patients: Will the Outcome Be Better Care, More Cost, or Both?” is based on HSC’s 2010 site visits to 12 nationally representative metropolitan communities: Boston; Cleveland; Greenville, South Carolina; Indianapolis; Lansing, Michigan; Little Rock, Arkansas; Miami; northern New Jersey; Orange County, California; Phoenix; Seattle; and Syracuse, New York.
HSC has been tracking change in these markets since 1996.
The study found that many healthcare systems are moving outside their traditional markets and into prosperous suburbs or nearby areas with growing, well-insured populations. And what that means for the healthcare design and construction industry is clear: This move will necessitate physical expansion.
Strategies in that expansion indicated by survey results include building full-service hospitals, establishing freestanding emergency departments and other outpatient services, acquisition of physician practices (which also likely will require some level of renovation), and the operation of medical transport systems.
Other key findings from the study include:
- In all 12 markets studied, hospitals pursued one or more types of competitive geographic expansions, including buying or building full-service hospitals or freestanding emergency departments, buying or establishing physician practices, and developing a regional presence through emergency medical transport systems.
- Among hospitals using these strategies, the drive to pursue well-insured patients beyond traditional hospital market boundaries appeared to be heightened by the recession rather than blunted by it. Even as hospital leaders pursued layoffs and contract renegotiations to cut operating costs, they often described freezes in construction outside of their traditional market areas as being brief and temporary, if pauses occurred at all.
- Some markets, such as Phoenix and Indianapolis, showed evidence of all of the geographic expansion strategies, while others, such as Syracuse and Lansing, showed evidence of only one or two. All types of strategies appeared more common in markets where large hospital systems had or were pursuing significant employment of physicians and where service-line strategies—for example, cardiac or cancer care—were well entrenched.
However, it remains to be seen if this extra capacity will pay off and how these new competitive strategies may end up affecting the cost of care for patients, both topics of debate surrounding the findings.