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The Rise of Outpatient Centers Autonomous Facilities Give Doctors More Control and Patients More Convenience

Posted on: Friday, 30 December 2005, 18:00 CST

By URVAKSH KARKARIA

Hospitals not only compete for patient dollars with each other, they are now increasingly facing-off with a nimble competitor -- the free-standing outpatient center.

The facilities, often co-owned by physicians, siphon lucrative procedures from hospitals and typically only serve the insured. That's why the burgeoning of these sites is triggering alarm bells in hospital boardrooms.

Surgery and imaging services -- which typically migrate to free standing outpatient centers -- are the hospital's "gravy train," said J. Douglas Green Jr., one of 11 area specialty physicians planning a $25 million outpatient surgery and diagnostic imaging center on the Southside.

"Those are the major profit centers for hospitals," and more and more of those procedures are being done in independent imaging and surgery centers, Green said.

The exodus of lucrative procedures to outpatient competitors is "a challenge," said Warren Chandler, senior vice president of strategic planning and business development at St. Vincent's Medical Center.

"Certainly, the hospitals need to make enough money to continue to invest, to continue to attract and retain quality people with the right skills," Chandler said. "We've got to provide an operation that can pay for itself."

Patients being treated in free-standing outpatient facilities "almost universally" have insurance, said Hugh Greene, president and CEO of Baptist Health.

"It's not unusual for physicians to take paying patients to their [outpatient] facility, but they bring the non-paying patients back to the hospital," Greene said.

Florida, for instance, has about 350 free-standing ambulatory surgery centers and such facilities are growing 10 to 15 percent annually.

There is an element of competition between ambulatory surgery centers and hospitals, said Peter Lohrengel, spokesman with the Florida Society of Ambulatory Surgical Centers. But the surgery centers are not thriving at the expense of hospitals, he added.

"There is such a surgical need in America that the hospitals cannot provide all the surgical care," Lohrengel said. "There's enough patients for both of them." TIME AND MONEY

Convenience, lower cost and technology are driving medical procedures once done within hospitals to free-standing outpatient centers.

The autonomous facilities give doctors more control and patients more convenience. Patients can check in, have a procedure and check out in a matter of hours. Surgeries at an ambulatory surgery center can typically cost 20 to 50 percent less than those performed in a hospital because the centers have lower overhead and fixed costs.

In August, Green disclosed plans for his 7-acre outpatient campus, about four miles southeast of St. Luke's Hospital. Center ONE will focus on orthopedic, spine and ear, nose and throat procedures and employ about 100. And, a 30,000-square-foot, $6 million-plus Southpoint Surgery Center at Southpoint Parkway and Belfort Road is expected to open next year. It will focus on eye, pain management and other surgeries.

Medical technology and minimally invasive procedures have made it possible for surgical and diagnostic procedures to be performed outside of a hospital. Limited reimbursement from private and government insurers have also impinged on physician incomes and forced many to hunt for other revenue sources, industry insiders say.

And physicians, looking to open outpatient centers, now have easier access to capital and management expertise from national for- profit companies willing to partner with them on such developments.

"It's natural that some [physicians] are going to explore these alternatives," Greene said. "This is not an adversarial thing on the part of doctors toward hospitals."

Physicians like the free-standing centers because it offers greater hiring, scheduling and purchasing control than they have in a hospital. Since the doctor-owners hold the purse strings, they have greater flexibility in deciding what equipment to buy or what kind of nurse to hire.

And reduced patient turnover time and better efficiency means physicians can do more procedures in the outpatient center.

"There's 25 percent more surgery done by the average surgeon in an outpatient surgery facility compared with an inpatient facility or a hospital-affiliated outpatient center," Green said.

Procedures performed in ambulatory surgery centers typically are done more efficiently and at less cost than in a hospital setting, said Craig Jeffries, executive director of the American Association of Ambulatory Surgery Centers in Johnson City, Tenn.

Therefore, instead of complaining about losing business to more efficient competitors, Jeffries said hospitals should focus resources on unmet health needs in the community such as obesity and diabetes management.COUNTER MEASURES

Hospital executives recognize the threat and some are chanting the "if you can't beat 'em, join 'em" mantra.

By partnering with physicians in launching outpatient centers, hospitals can "in a sense share the wealth," Green said.

Hospitals also lure specialists such as orthopedic surgeons to practice with them by opening dedicated outpatient centers for the physicians and allowing them to invest in the facilities, he said.

Memorial Hospital is planning a roughly $40 million outpatient campus that will include a 14,000-square-foot outpatient surgery center, across Butler Boulevard from St. Luke's Hospital. The 11- acre outpatient campus, co-owned by physicians, is also expected to offer diagnostic imaging services and an urgent care center.

Memorial's foray into outpatient centers is fueled by patient demand for convenient medical care, senior vice president Bradley Garcia said.

"We are choosing a particular strategy of trying to work with our physician partners in as many cases as possible," he said. "We think that partnering with physicians is the surest means toward long- term satisfaction" for patients, physicians and the hospital.

Baptist Health "collaborates" with physicians to launch outpatient centers.

"We have an understanding of and a respect as to why physicians are getting involved in these kinds of [developments]," Greene said. "Rather than they join up with some out of town for profit entity we try to work with them ourselves."

Despite those efforts some Baptist physicians have gone out and developed outpatient centers on their own and that has cost the health system some revenue.

Greene takes the non-confrontational road.

"It's understandable in a free market that people are going to create . . . competing entities," Greene said. "We try to have very strong collaborative relationships with our physicians and work through these issues together as opposed to getting into an adverse competitive environment."

St. Vincent's invests about $4 million to $6 million annually to upgrade and expand its outpatient facilities partly to compete with physician-owned competitors. Outpatient services account for about 35 percent of the Riverside hospital's annual revenues.

"We've got to be very attentive to making our [hospital-based] outpatient services . . . convenient, effective, efficient both for the patient as well as the doctor," Chandler said. "We've got to provide a very competitive and attractive alternative to the doctor doing the services in their own office."urvaksh.karkaria@jacksonville.com, (904) 359-4367

Source: Florida Times Union

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