Your facility does what procedures? Surgical hospitals expand limits

Increasing numbers of freestandings gain hospital designation

Neurosurgery at a freestanding facility? Yes, and also simple craniotomy, gastric bypass, and colectomy. It’s all part of a recent trend toward specialty hospitals, including "surgical hospitals" with no limitations on length of stay. Other specialized facilities include orthopedic facilities, women’s hospitals, cancer centers, and cardiac centers. While surgical hospitals sound like extended recovery care centers, they’re actually a new creature that is scratching out a home in a territory between surgery centers and hospitals.

"This industry is growing by leaps and bounds," says Michael Lipomi, CEO of Stanislaus Surgical Hospital in Modesto, CA , which converted in 2000 from a freestanding surgery center to a surgical hospital. Lipomi is the president-elect of the Fresno, CA-based American Surgical Hospital Association. "When we started the association a year and a half ago, we were able to identify 20 [surgical hospitals] that were operating or in some state of development," Lipomi says. "Currently, there are [more than] 40 facilities open and operating and another 50 to 60 in some state of growth or development."

And there’s a similar trend: Some traditional acute care hospitals are converting to all outpatient care.

Some of the factors causing the growth of surgical hospitals include reimbursement, physician interest, and consumerism, which includes the "branding" of specialty centers of excellence, says Fred Campobasso, president/CEO of AMDC Corp., a Chicago-based firm that handles real estate project management, development, finance, and strategic consultation. "Physicians have an interest in being a little more entrepreneurial and controlling that revenue stream," Campobasso says.

Medicare won’t reimburse surgery centers for procedures unless they are on the list of procedures approved for surgery centers. "It makes it very complex from a reimbursement standpoint if you’re not a licensed hospital,’" says Bonnie Leinart, president of Moline-based Trinity Medical Center’s Illinois campuses. Trinity’s Seventh Street facility opened in 1997 as an outpatient complex, offering surgery, cancer care, emergency care, extended recovery care, and imaging. The facility recently became licensed as a hospital.

Patients often prefer surgical hospitals because of the atmosphere, proponents say. For example, Trinity’s Seventh Street facility was built with a reflecting pond, café, drive-through pharmacy, patio, and views of the exterior landscaping and the pond. Some surgical hospitals have amenities including VCRs and professional chefs.

Physicians often are attracted to surgical hospitals because they are user-friendly, proponents say. "Because we don’t have an emergency department [ED], open-heart surgery, or a cath lab, we don’t do major neurosurgery, etc.; there’s less likelihood of cases being delayed, postponed, or cancelled," Lipomi says. "We cater to the physicians and the patients."

Most surgical hospitals are built from scratch, rather than being converted from freestanding surgery centers, Campobasso says. Many freestanding centers don’t have the land available to expand, he explains. However, some facilities are being built as 23-hour centers, with tentative plans to phase into a surgical hospital based on growth and market conditions. Most of the patients stay three days or less, he says.

One of the most important factors that distinguish surgical hospitals from surgery centers is the unlimited length of stay. In outpatient surgery, often there is the potential that the patient will need an overnight facility. "Once in a while, patients would have excessive pain or nausea, and the doctor wanted them to stay, but we had to transfer them," Leinart says.

The extended recovery care facility faced other regulatory requirements, including no blood transfusions, no patients with infections, and no transfer to extended recovery care beds unless the patients had undergone surgery, as well as staffing limitations and extensive paperwork. "I wouldn’t pursue [building an extended recovery care center] in any state," Leinart advises, pointing out that the extended recovery care beds at her facility were a demonstration project. "What we’ve found, and what I think the state has found, is that this is a concept that really doesn’t work. I think we were set to be as safe as a hospital, which is appropriate. You may as well be a hospital."

Costs come down with surgical hospitals

Surgical hospitals realize several advantages over traditional hospitals, proponents say. For example, in some states, they aren’t required to have an ED and costly support services that typical hospitals have, Campobasso says.

In addition, the facilities are designed for surgical patients who are otherwise healthy, Lipomi says. "For patients, it means that they are not exposed to higher infection rates in general acute care hospitals," he says. The infection rate at Stanislaus is 0.1%, compared to a 3% rate at hospitals nationwide, Lipomi says. "It’s not that the other facilities are bad, but they treat patients we don’t normally treat, he says. "We don’t have an ED; we don’t do trauma; and we don’t do chronically ill patients."

In addition, the revenue-enhancement possibilities are significant, Campobasso says. For example, Trinity’s campus had 20 extended recovery beds that had an average daily census of four, Leinart says. At the same time, one of the health system’s other facilities was at capacity, she says.

"We sought to license as a hospital to have greater flexibility for beds," Leinart says.

Often, hospitals find that surgical hospitals allow a secondary market away from the main campus without the expense of building a traditional hospital, Campobasso says. "If they’re expanding orthopedics, for example, and they need capacity in the ORs — if they shift to a specialty hospital concept, it frees up the main ORs for growing some of the service lines of excellence that they’re looking to enhance," he says.

The impact of surgical hospitals on other surgical providers is uncertain, but competition is certain to increase. "I think the consumer will gravitate to more of these branded’ surgical facilities," Campobasso says. "The belief will be that the quality of care at a specialty outpatient facility will be better than at the hospital itself."

Lipomi is less certain of the impact because surgical hospitals have their own niche, he says. "We don’t want to be an acute care hospital with open-heart surgery and [EDs] and all of that. We don’t do OB," he says. "As such, there’s still a critical need for a full-service acute care hospital."

Extended recovery care centers may feel the heat of competition, Campobasso warns. "But I think there’s still a place in marketing for the 23-hour same-day surgery concept," he says. "It’s by location, and it’s very market-specific."

Don’t look for traditional surgery center to disintegrate either, Lipomi advises. "I think what’s happening is that in smaller communities, with smaller groups of physicians, surgery centers are perfectly appropriate."

For others, consider the surgical hospital model, proponents urge. "If [facilities want] to have more than same-day services, they’re probably best served to go ahead and bite the bullet and be a full-service hospital or specialized hospital, if that option is available in their state," Leinart says

Expect the trend to grow, says Alan Pierrot, MD, president of the American Surgical Hospital Association and CEO of Fresno-based FSC Health, which develops, manages, and owns surgical hospitals in joint ventures with physicians. "I think we will see tremendous proliferation of this model over next decade," Pierrot says. "I think we’re on the verge of an explosion of surgical hospital growth."


For more information, contact:

Cherie Fulks, Vice President of Patient Care Services, Trinity Medical Center, 2701 17th St., Rock Island, IL 61201.

Michelle Halvorsen, Director of Marketing, AMDC Corp., 10 S. Riverside Plaza, Suite 2290, Chicago, IL 60606. Telephone: (312) 756-9300. E-mail:

Michael Lipomi, CEO, Stanislaus Surgical Hospital, 1421 Oakdale Road, Modesto, CA 95355. Telephone: (209) 572-2700.

Alan Pierrot, MD, CEO, FSC Health, 6051 N. Fresno St., Suite 102, Fresno, CA 93710. Telephone: (559) 447-7700. Fax: (559) 447-7701. E-mail: