HFMA ANI 2008: Hospitals need flexibility for outpatient success

Today, hospitals are placing greater importance on developing outpatient ventures that serve their business. However, to succeed, hospital leaders need to be both flexible and opportunistic, rather than sticking to the models they're familiar with from running inpatient services, said panelists at a session held this week at the HFMA ANI show.

According to research by finance firm Ziegler Capital Markets, hospital outpatient departments perform about 68 percent of outpatient surgeries, but with more than 5,000 freestanding ambulatory surgery centers in operation today, hospitals are losing substantial amounts of outpatient surgical business. What's more, companies are emerging to compete for outpatient business in several new areas, including dialysis, eye surgery, diagnostic imaging, radiation therapy and rehab/physical therapy, notes James Redpath, managing director and head of corporate finance for Ziegler. Pressures like these are pushing hospitals to diversify into new outpatient ventures, simply to avoid losing existing business if not to capture new markets, panelists agreed.

To counter competitors, hospitals are engaging in a wide variety of new relationships with physicians. Panelist Ann Beck, vice president and chief financial officer of Carson City, NV-based Carson Tahoe Regional Medical Center, has focused on building out several varieties of outpatient ventures to defend her hospital's business from incursions by several rival facilities. Among other steps, Beck has worked to increase the number of urgent care sites it provides, to serve as feeders to the hospital, beefed up and consolidated its imaging services to make them more convenient for patients and doctors, and hired a management firm to improve operations within its outpatient behavioral health services division.

Meanwhile, Beck has been working to improve the hospital's access to physicians, too, in part by purchasing physician practices and also by creating a separate corporation to run a new multi-specialty practice. "The overall goal is to focus on inflexible operations and improve them," Beck said.

Outpatient strategies have also been critical for Mercy Health Partners' Northern Region, according to chief financial officer Samantha Platzke, CPA. The Toledo, OH-based regional organization, which competes with at least five hospitals boasting relationships with 800 physicians, has worked to create outpatient programs that drive traffic into its hospitals. These include hospital-run outpatient oncology centers, orthopedics centers co-managed with physicians, and a cardiovascular testing center owned partly by the hospital and partly by physicians. Platzke has also kicked off an ambulatory surgery center in a joint venture with physicians and offered up an ambulatory electronic medical record system to foster loyalty among the community's primary care physicians. Yet another effort in the works is retail clinics, which Mercy Health plans to offer by contracting with a for-profit company focused on this niche.

The key, Platzke says, has been to adopt the right mindset. "We need to think about things from a consumer perspective, not our normal way of doing things," she said. "We need to focus not on outpatient services as such, but what are the services that drive business and decide what outpatient options can help them grow."  While every hospital's needs will be different, "I wouldn't say that a do-nothing approach is the right one," she said.