As hospital administrators hope to engage more physicians, to be competitive in a changing marketplace and to reduce health care delivery costs, outpatient service lines offer promise. More consumers are seeking outpatient services as they find them more accessible — driving great distances to the "hospital on the hill" is no longer appealing if all a patient is looking for is routine care.
In a 2010 report, the health care information firm Sg2 projected that demand for outpatient services would increase by nearly 22 percent, while the demand for inpatient services would remain flat between 2010 and 2019. Ambulatory care now accounts for a majority of many hospitals' annual revenue, with some hospitals, such as William W. Backus Hospital in Connecticut, reporting that outpatient revenue accounts are making up 60 percent of their gross revenue.
Physician Alignment Strategies
Hospitals are investing more in ambulatory services to account for patients' migration from inpatient to outpatient settings and to align with physicians through different models. Joint ventures and co-management agreements, as well as the acquisition and development of hospital outpatient departments and freestanding facilities, all make financial and operational sense. Below are three proven alignment strategies you should consider to minimize risks and maximize gains from your ambulatory care partnerships.
Give your ambulatory strategy the same importance as your inpatient strategy, if not more. Too often, the words "including outpatient" are just added to proposed inpatient initiatives when hospitals and boards are developing strategic plans. With a larger percentage of revenue coming from ambulatory services, you cannot afford to view ambulatory care as just a grouping of ancillary services. Commit time and resources to developing a strategy specifically focused on growing outpatient service lines.
Many of the initiatives in health care reform point toward well-executed outpatient care platforms that can become the backbone of hospital and health systems, pushing "big brother" inpatient to the backseat. But hospitals frequently fail to identify an executive who can address operational differences for outpatient services.
Add a C-suite executive and corresponding infrastructure to oversee and operate an ambulatory service line. You can develop the day-to-day management internally, outsource it or do both. Regardless of the structure, your ambulatory team must have experience with outpatient operations, ideally from the for-profit sector, to be competitive and thrive, not just survive.
Consider all possibilities for physician engagement. A single approach is not likely to work for every situation. Consider all options available, keeping in mind that regulations stipulate what hospitals can and cannot do with the types of engagement models they may employ in relation to their outpatient facilities.
For example, acquiring an ambulatory surgery center and converting it to an outpatient department might bring a boost in reimbursement. But purchasing a portion of the center and operating it with physicians as a joint venture may be a better way to keep physicians engaged, and therefore aligned, with your hospital's interests. Don't stop with the purchase of a physician-owned center. Support the acquisition (and physician partners) by conducting a thorough review of existing surgical cases; and identify procedures currently being performed in main ORs that may be more appropriately performed in the center, freeing up valuable operating room space for higher reimbursing inpatient surgeries. This is a quick win-win for you and your physician partners.
When setting up hospital service lines to operate in satellite locations, consider a co-management or consulting services arrangement with the physicians involved in those facilities to keep the physicians engaged and invested in the performance of the facility. In a co-management agreement, hospital leaders and physicians jointly manage the delivery of care, with the physicians receiving a fee for their services. Sometimes it makes more sense to enter into a consulting arrangement with the physicians of the various service lines and have the hospital engage the group to provide ideas and input.
There is no one-size-fits-all model; design a structure that works for your unique situation, as long as the arrangement passes regulatory muster. Such arrangements are not limited to the service lines in the outpatient setting, but it is often easier to start off with outpatient services and expand the arrangement to the inpatient setting if the partnership is successful.
Financial partnerships on their own, whether in freestanding facilities or co-management arrangements, may help to keep physicians engaged in outpatient services. To further ensure that these partnerships remain successful, consider establishing easy and, if applicable, low-cost means for younger physicians to become involved. Allowing for the purchase of fractionated shares is just one way to bring the buy-in of mature ventures down to a manageable investment.
Even if these younger physicians are not as busy as their older peers, their practice is likely to grow, and you will want them to take on greater responsibility as senior physicians cut back on their practice and retire. When younger physicians become involved early in their career, they are more likely to remain loyal to your hospital and to become personally (and potentially financially) invested in the success of your facilities.
Make sure physicians have a strong voice in your decision-making process, and explore opportunities to improve the physician experience. If physicians believe that your hospital values their opinion and time, and is working to provide them with a better working environment, they are more likely to view their experience positively and do what they can to help the hospital succeed. Isn't that the objective of physician engagement?
Avoid "hospital creep." One of the biggest frustrations for physicians, especially those who have owned or practiced in freestanding facilities, is how hospitals appear to have little respect for their time. When they perform cases in the hospital, they often experience long room turnovers, disappearing support staff or equipment and unavailable administrators. Developing outpatient service lines provides an opportunity to start over and eliminate inefficient waste in operations. Question every system and re-engineer it for the new setting.
Outpatient service delivery is not just inpatient service delivery in a freestanding building. The patients seen in these facilities are generally healthier, and the procedures shorter and less invasive, than inpatient procedures. Whenever possible, run the outpatient center's functions like the competitive freestanding facilities in the community, not like a hospital's inpatient departments. While you will need to take the Centers for Medicare & Medicaid Services' provider-based rules into account, do your best to limit the influence of inpatient operations.
For example, keep staffing plans lean, and ensure that staff members (as well as any consultants or service providers contracted) have outpatient experience and understand the outpatient mentality. Keep equipment, supplies and IT applications lean and focused on the types of elective procedures typically performed at an ambulatory care facility.
Internal Commitment to Outpatient Services
While outpatient services, when operated properly, can make a positive contribution to the bottom line, you must view ambulatory care primarily as a critical component to your long-term strategy for success. If you judge investments and analyze future opportunities in outpatient services based solely on the potential financial return on investment from the facility, you are missing the bigger picture.
Patients and payers now are supporting, and will continue to support, those organizations that provide as many services as possible in the lower-cost, more efficient, integrated outpatient setting. Assess your level of commitment and dedicate the time and resources to what may be already, or will soon become, the primary source of revenue for your organization.
Joan Dentler is president and founder of Outpatient Strategies and of ASC Strategies in Austin, Texas.