Hospital leaders are devoting more time to developing a successful and sustainable outpatient strategy to meet the need in the outpatient services market. This market segment is a key strategic priority for hospitals and health systems because it drives growth in both the top line and bottom line. Increased demand for outpatient services has fueled competition among hospitals and surgical facilities that compete to bring care closer to patients. The two prevailing models to achieve this are a partnership with local physicians or the development of a hospital outpatient department (HOPD). Each market is different and there is not one right choice. The article focuses on three key factors that are involved in the decision making process. Physician Integration: An important consideration for a hospital leader is: “What kind of relationship do I want to have with my current physicians and the physicians of the broader community?” Hospitals seeking to strengthen relationships with their existing physician network as well as facilitate new relationships should consider the partnership model. This model allows both hospital and community-based physicians to participate in the center as partners, facilitating a higher degree of collaboration between the hospital and physicians. Deal structure is critical for this model to work and there are various ownership models that exist. Regardless of the ownership model pursued, it is vital that physicians own a significant percentage of the equity. The right model will align the interests of all parties and drive clinical and operational excellence within the surgery center. Service Area Expansion: A physician JV allows for a hospital to easily extend its geographic footprint by investing in a partnership outside of its existing territory. Rather than opening a HOPD on campus, many hospitals look to partner with physicians in a new or existing ASC in order to achieve:
- Higher brand awareness for the hospital. 2. Increased outpatient volume through penetration of new markets. 3. Expanded outpatient services through introduction of new specialties.
If a JV partnership is pursued, it is important to conduct a market assessment to understand market factors that may influence long-term success, including:
- Employment rates of physicians within target market. 2. Current and projected outpatient case volume. 3. Mix of outpatient cases. 4. Payer dynamics and reimbursement expectations within target market.
Reimbursement Improvement: HOPDs, because they fall under the hospital contract, often receive rates 10-40% higher than the same case could command if performed at a hospital/physician ASC JV. In this scenario, the hospital owns 100% of the HOPD and therefore 100% of the revenue from the center. Since a physician-hospital JV may also leverage the payer contract, the rates will be appreciably higher than that of an independent ASC. In this scenario, both the hospital and physicians share ownership of the center and profit distributions. If a hospital does not have a need to attract additional physicians and/or patient cases, or if they have no need to expand service area, the HOPD may be the preferred option from a purely financial point of view. At Regent, we have developed a reputation for providing unbiased guidance to hospitals and physicians on outpatient strategies. We understand that the hospital strategy will play an important role in informing the final decision. Hence, we provide our partners with guidance in the context of the broader corporate strategy. The result is a clear picture of the options we believe will be successful. If you would like more information, please contact Christine Musa, Director of Business Development for Regent Surgical Health. Christine Henry Musa, MBA Director, Business Development Phone: 708-498-4476 Email: firstname.lastname@example.org