A niche busi­ness

More hos­pi­tals fo­cus­ing on limited ser­vice lines

Modern Healthcare - - FINANCE - Beth Kutscher

Mid­way through their preg­nan­cies, ex­pec­tant mothers who plan to de­liver at Win­ter Park (Fla.) Me­mo­rial Hos­pi­tal will meet with a “birth de­signer” to chore­o­graph their ideal birth ex­pe­ri­ence.

No de­tail is left over­looked at the Dr. P. Phillips Baby Place, from the types of pil­lows on the new mom’s hos­pi­tal bed to the mu­si­cal sound­track that will help ease the long hours of la­bor to whether and when she’s of­fered pain re­lief.

And af­ter the baby ar­rives, the new mom can re­lax on her high-thread-count sheets, or­der an in-room mas­sage or freshen up with the high-end bath prod­ucts pro­vided.

“We try to cre­ate a much more per­son­al­ized ex­pe­ri­ence for pa­tients,” says Ken Bradley, ad­min­is­tra­tor at Win­ter Park, which also of­fers or­tho­pe­dics, sleep medicine and ears, nose and throat spe­cial­ties.

Or­lando-based Florida Hos­pi­tal, which owns Win­ter Park Me­mo­rial, is part of a grow­ing num­ber of sys­tems that are cre­at­ing a per­son­al­ized, up­scale ex­pe­ri­ence for pa­tients and in­vest­ing in smaller hos­pi­tals that of­fer a limited num­ber of spe­cialty ser­vice lines.

Bou­tique and spe­cialty hos­pi­tals have been pro­lif­er­at­ing for more than a decade, but they are no longer solely the do­main of physi­cians and other in­de­pen­dent op­er­a­tors. In­stead, they are also part­ner­ing with larger, more tra­di­tional health sys­tems.

“I think we’ve seen a fairly sig­nif­i­cant tran­si­tion in own­er­ship,” says Bill Cherry, a prin­ci­pal at Pin­na­cle Health­care Con­sult­ing. “I cer­tainly see that as a trend that can con­tinue.”

Health­care re­form has ac­cel­er­ated the shift, both be­cause of changes to the Stark anti-kick­back law that fur­ther re­stricts physi­cian own­er­ship of hos­pi­tals as well as the in­creased fo­cus on pop­u­la­tion health man­age­ment, which en­cour­ages more in­te­grated health­care de­liv­ery.

Sys­tems have long used a hub-and-spoke model, where com­mu­nity hos­pi­tals feed more com­plex pa­tients into the flag­ship ter­tiary-care cen­ter. But some are turn­ing that model on its head, with the “spokes” be­ing high-mar­gin, high-tech ser­vices that can be pack­aged with ho­tel-like ameni­ties in less-ur­ban set­tings.

While the spe­cialty ap­proach might seem coun­ter­in­tu­itive dur­ing a time when hos­pi­tals are be­ing en­cour­aged to take more con­trol of the en­tire con­tin­uum of care, ex­ec­u­tives say their goals ac­tu­ally align with health­care re­form to de­liver value-based ser­vices and mo­ti­vate pa­tients to take more con­trol of their health.

At Co­or­di­nated Health, a hos­pi­tal net­work in eastern Penn­syl­va­nia, Pres­i­dent and CEO Dr. Emil DiIo­rio sees two kinds of care: “em­pir­i­cal medicine,” which re­quires com­plex, mul­ti­dis­ci­plinary team­work, and “pre­ci­sion medicine,” where the care might be high-tech but still rou­tine. “Th­ese need to be split up,” he says, fur­ther ar­gu­ing that pay­ment mod­els should dif­fer be­tween each group, with the for­mer bet­ter served with a fee-for-ser­vice model and the lat­ter with a bun­dled pay­ment.

Most of Co­or­di­nated Health’s ser­vice lines— or­tho­pe­dics, mus­cu­loskele­tal health, car­di­ol­ogy and women’s health—fall into the lat­ter cat­e­gory. “There’s no rea­son why those con­di­tions can’t have a sin­gle price,” he says.

DiIo­rio, who stud­ied sys­tems en­gi­neer­ing be­fore go­ing to med­i­cal school and train­ing as an or­tho­pe­dist, notes that the ti­tans of Sil­i­con Val­ley pur­posely limit their scope to a few ar­eas. “They don’t try to be ev­ery­thing to ev­ery­one—it’s im­pos­si­ble,” he says. “It’s not about cherry-pick­ing; it’s about putting in the right busi­ness model.”

While spe­cialty hos­pi­tals are de­signed to cre­ate a cer­tain at­mos­phere—per­haps best de­scribed as an ul­tra high-tech ho­tel—Cherry notes that they can be more cost-ef­fec­tive than their sprawl­ing ter­tiary-care coun­ter­parts.

“The in­fra­struc­ture is set up for one set of ser­vices only,” he says, adding that th­ese hos­pi­tals also don’t have to deal with the in­ef­fi­cient use of re­sources that come, for in­stance, when a pneu­mo­nia pa­tient is ad­mit­ted to a car­di­ol­ogy floor be­cause of a lack of beds.

Out­comes also tend to re­flect the highly spe­cial­ized ex­per­tise of the staff. “In spe­cialty hos­pi­tals, physi­cians tend to be very much en­gaged in the op­er­a­tions of the sys­tem,” Cherry says. “In gen­eral, the spe­cialty hos­pi­tals have been suc­cess­ful and ef­fec­tive over the past decade in im­prov­ing op­er­a­tions and im­prov­ing the level of qual­ity.”

A 2006 study in the Jour­nal of Health Economics that looked at car­diac spe­cialty hos­pi­tals found that th­ese types of fa­cil­i­ties low­ered the cost of the care with­out com­pro­mis­ing qual­ity. But the au­thors also found that spe­cialty hos­pi­tals tend to at­tract health­ier pa­tients and per­form more in­ten­sive pro­ce­dures.

In an age when pa­tient sat­is­fac­tion mat­ters, spe­cialty hos­pi­tals have an edge on the cus­tomer ex­pe­ri­ence. “The de­mand has been strong,” Bradley says of the Baby Place. “We’ve had a grow­ing mar­ket share in a mar­ket that has oth­er­wise de­clined.”

Bradley adds that the hos­pi­tal has taken the ser­vices it nor­mally pro­vides and cus­tom­izes them, and of­fers a few ad­di­tional up­grades— such as a gourmet can­dle­light din­ner for the new par­ents or a trip home in a Mercedes limou­sine—for an ex­tra out-of-pocket fee.

It of­fers sim­i­lar perks to its or­tho­pe­dics pa­tients, many of whom do not have com­mer­cial in­sur­ance but are on Medi­care, Bradley says. “In­sur­ance and out-of-pocket have noth­ing to do with each other.”

Ortho­pe­dic pa­tients who come in for a pro­ce­dure such as a knee re­place­ment can con­sult with the hos­pi­tal’s concierge staff at no charge, pay­ing only for the out­side ser­vices they use. “We get an amaz­ing num­ber of peo­ple who say … what’s go­ing to hap­pen to my pets or what’s go­ing to hap­pen to this or that?” Bradley says.

As sys­tems move more care away from ur­ban cen­ters and into the sub­urbs, they’ve also started to think about which ser­vices would be most at­trac­tive to those res­i­dents.

“We try to look at com­mu­nity needs and try to build cen­ters of ex­cel­lence around them,”

says Dr. Julie Tome, vice pres­i­dent of med­i­cal op­er­a­tions and clin­i­cal in­te­gra­tion at Pro-Med­ica Health Sys­tem, Toledo, Ohio.

Pro-Med­ica’s 591-bed Toledo Hos­pi­tal and the ad­ja­cent Toledo Chil­dren’s Hos­pi­tal are its ter­tiary-care base. But the Hick­man Can­cer Cen­ter, its on­col­ogy hub, is at the sub­ur­ban Flower Hos­pi­tal in sub­ur­ban Syl­va­nia.

“We did that by de­sign,” says Kevin Webb, pres­i­dent of the sys­tem’s acute-care di­vi­sion. “We spent a lot of cap­i­tal on the Flower cam­pus. It’s got a pas­toral set­ting. It’s a nice set­ting for peo­ple go­ing through a ter­ri­ble dis­ease.”

Like­wise, the sys­tem’s Wild­wood Or­thopaedic and Spine Hos­pi­tal, while still in Toledo, is closer to the sub­urbs than Cen­ter City. The hos­pi­tal is also home to the Wild­wood Ath­letic Club, a 40,000-square-foot fit­ness cen­ter that’s open to any­one who wants to join. “One of the ap­peals of a bou­tique hos­pi­tal is an aura of ex­per­tise,” Webb says.

While that draws pa­tients, it also at­tracts physi­cians, who lead a num­ber of Pro-Med­ica’s spe­cialty di­vi­sions. It also al­lows sys­tems to in­vest more strate­gi­cally in tech­nol­ogy. A treat­ment such as ra­di­a­tion ther­apy, for in­stance, can be ex­pen­sive to pro­vide at mul­ti­ple sites, Webb notes.

“I think sys­tems are be­ing forced to do that more and more be­cause of the costs of du­pli­ca­tion,” he says about the in­ter­est in spe­cialty hos­pi­tals. “More sys­tems are do­ing that just to ra­tio­nal­ize costs.”

But even as ser­vice of­fer­ings have be­come more spe­cial­ized, Pro-Med­ica is in­creas­ingly fo­cused on pop­u­la­tion health man­age­ment, Tome says.

“A lot of work on pop­u­la­tion health is done not in bricks and mor­tar, but in vir­tual (set­tings),” she says, not­ing that Wild­wood was the sys­tem’s first all-dig­i­tal hos­pi­tal, us­ing elec­tronic health records and other IT, when it opened in 2011. “A lot of this work is done by we­bi­nars, elec­tron­i­cally and by con­fer­ence call­ing. We also use a lot of telemedicine.”

While many of the ser­vice lines bou­tique hos­pi­tals of­fer are high-vol­ume, high-mar­gin spe­cial­ties, women’s health has also been a stand­out. DiIo­rio of Co­or­di­nated Health notes that women make the vast ma­jor­ity of de­ci­sions on health­care spend­ing, which means that in­vest­ing in women’s health can pay big div­i­dends.

Ne­braska Methodist Health Sys­tem, Omaha, started think­ing about ser­vice-line plan­ning when it be­gan to run out of room at its 460-bed acute-care cam­pus. Physi­cians iden­ti­fied the women’s ser­vices depart­ment—which was tak­ing up three floors—as one of the eas­i­est to re­lo­cate. Methodist Women’s Hos­pi­tal, Omaha, opened in 2010. Al­though the new fa­cil­ity is only 10 miles away from the flag­ship cam­pus, it’s closer to the sub­ur­ban ZIP codes that rep­re­sent most of the ba­bies it de­liv­ers.

Thanks to rec­om­men­da­tions from lo­cal women com­mu­nity lead­ers as well as physi­cians, Methodist Women’s is de­signed to in­voke a week­end get­away more than a hos­pi­tal stay. Each room has a re­frig­er­a­tor, a safe, a hair-dryer, a van­ity and a suit­case rack. Bath­rooms have al­coves for toi­letries and peri bot­tles. Med­i­cal equip­ment is hid­den be­hind cup­boards.

In ad­di­tion, six rooms for high-risk preg­nan­cies are de­signed to pro­vide all the com­forts of a stu­dio apart­ment, since stays for women at risk of preterm birth can of­ten stretch into months.

Even though women’s health is the hos­pi­tal’s pri­mary ser­vice line, the fa­cil­ity also of­fers many other ser­vices that are in de­mand in the sur­round­ing com­mu­ni­ties out­side of the ur­ban core, in­clud­ing an emer­gency room, imag­ing ser­vices for men and women, and gen­eral surgery pro­ce­dures. An ad­ja­cent of­fice build­ing not only of­fers ado­les­cent gyne­col­ogy and mid­wifery care, but also be­hav­ioral health and skin re­newal ser­vices.

“Our goal pa­tient-wise is to be a one-stop shop,” says Sue Korth, Methodist Women’s vice pres­i­dent and chief op­er­at­ing of­fi­cer. “We built the hos­pi­tal for our fu­ture growth.”

Methodist Women’s also works closely with Ne­braska Methodist Hos­pi­tal to fa­cil­i­tate pa­tient trans­fers. Women’s Hos­pi­tal, for in­stance, prides it­self on be­ing able to trans­port car­diac catheter­i­za­tion pa­tients to the ter­tiary-care cam­pus within the cru­cial 60-minute time frame.

“We were hop­ing the emer­gency depart­ment would be a feeder to the hos­pi­tal and not can­ni­bal­ize them,” Korth says. “We col­lab­o­rate very well.”

Pri­vate rooms at Methodist Women’s Hos­pi­tal are de­signed to feel more like a ho­tel stay than an in­pa­tient ad­mis­sion.

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