Why are health care operators setting up shop next to rivals?

Pittsburgh Post-Gazette

In a fiercely competitive retail environment, opening your store next to a competitor’s could be taken as a thumb in the eye, but the strategy is becoming a mainstay in the staid world of medicine — at least in Western Pennsylvania.

Exhibit A: WVU Medicine’s recent groundbreaking for an outpatient clinic in Waynesburg. The practice could be aimed at claiming market share, maybe even patients lost to a rival, but one local hospital official says that opening up shop near a competitor is predatory and wastes scarce health care dollars by duplicating existing services.

And don’t look to the government for relief. Pennsylvania hasn’t regulated what health systems build or buy since the late 1990s when the state’s certificate of need law mandate quietly sunseted.

The 24,000-square-foot clinic, a $14 million investment with 21 exam rooms scheduled to open in the fall of 2019, is just a mile from Washington Health System Greene, a struggling 48bed hospital that’s part of a Washington County-based medical network.

Complementing WVU’s medical offices will be a MedExpress urgent care center next door for minor medical emergencies.

At the groundbreaking, West Virginia University Health System President and CEO Albert Wright said the clinic had room for expansion. “We bought a lot more property than we need for this building,” he told a crowd of doctors, government officials and others.

Clustering health care facilities is an idea borrowed from the retail industry at a time when health care providers are taking a more retail approach — improving patient convenience in where facilities are located, parking and other amenities, according to Paul Sill, senior managing director, global retail analytics practice leader at Chicagobased CBRE Forum Analytics Group.

Having a doctor’s office or medical facility near an employment complex makes it easier to schedule a lunch appointment, he said.

“What’s happening is that health care is operating just like a retailer,” Mr. Sill said, “bringing care closer to the patient. It’s happening at different speeds around the country.”

Finding the “good corner” means weighing sophisticated analytics, including nearby hospital discharge data; the proportion of the population with commercial insurance, which often has the most generous reimbursement; age of the population; and other data.

So, it may not come as a surprise when competing health care systems wind up picking the same spots.

Take Allegheny Health Network, which is building its first mini-hospital just two miles from Excela Health Westmoreland Hospital.

Moreover, AHN’s second such facility is sited a quick walk from a large outpatient center operated by rival UPMC off Route 28 in Harmar. And AHN isn’t alone.

For its part, UPMC has scouted places to build a new hospital in Pleasant Hills and Jefferson Hills, drawing criticism from rival Allegheny Health Network, which runs an acute care hospital nearby. Several years ago, UPMC chose a site for its Monroeville hospital just a few miles from AHN’s Forbes Regional Hospital.

UPMC officials have not commented publicly on AHN’s minihospital plans near UPMC’s outpatient center in Harmar, but Excela President and CEO Bob Rogalski criticized AHN’s planned hospital in Westmoreland as “predatory” and “duplicative.”

Meanwhile, in a written statement, Washington Health System President and CEO Gary Weinstein said his health system would continue to provide medical care in Greene County.

“WHS, which was the only health system that stepped up to operate Greene County’s lone hospital three years ago when the former owner departed, has built a top-notch emergency department and rural hospital to care for Greene County residents close to home,” he said.

Even before the new WVU clinic was announced, Washington Health Systems’s Greene hospital was fiscally stressed, reporting a negative operating margin of 10.39 percent for fiscal year 2017, according to the Pennsylvania Health Care Cost Containment Council, a Harrisburgbased agency.

A hospital’s operating margin is the share of its total revenue that comes from core services, such as surgery and taking care of patients in the emergency department.

The Washington Health System’s loss in Greene County was the third biggest among Western Pennsylvania hospitals for the year.

Then again, the opening of a competing medical center near existing health care facilities may not make much difference.

Uniontown Hospital President and CEO Steve Handy dismissed WVU Medicine’s potential impact on patient choice of hospitals for Pennsylvania residents, adding that WVU’s strategy in Waynesburg is simply to increase referrals to its bigger medical facilities in West Virginia.

“I know they see Fayette County as their service area, but we don’t believe we’ve lost any volume to Morgantown,” Mr. Handy said.

The Waynesburg clinic will be WVU Medicine’s second in Pennsylvania. The first opened last year at Highlands Hospital in Fayette County.