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Smart providers looking to profit from reform
By Stephen W. Earnhart, MS, CEO
Earnhart & Associates
I have met with some interesting people over the past 30 days "interesting" is not always a good thing and the future of health care is starting to gel with some.
I interviewed for, and was interviewed by, four potential clients. It might be a precursor of what is to come. These are all actual clients and scenarios.
Potential client one. A small hospital that has been shut down is looking for investors to re-open its doors. What I found most interesting about this is that they contacted me (and others like me, I will admit) and not local docs. Why contact a person like me? While there are certain financial benefits to reopening the doors of this facility, the greatest benefit seems to be for the investors and not physicians or the soon-to-be patients.
Outside investor types are gearing up for what they see as an influx of patients into the health system. They clearly believe that with another 32 million people having access to health care in the near future, hospitals are going to quickly run out of beds, and this situation will create need for more beds. There might be merit to their thinking.
Potential client two. A hospital chain wants to test a cash-only emergency department (ED). This ED would be a hybrid between a traditional ED and a commercial street corner walk-in urgent care center. No insurance plans will be accepted. It will be strictly cash. While these are not all that uncommon, they are uncommon for the traditional not-for-profit hospital. Gutsy, and I like everything about their thinking. Everything you need to submit to your insurance carrier to be reimbursed for your visit will be provided upon your discharge. While we have done a number of these, this will be a first for a real hospital system.
Potential client three. A group of orthopedic surgeons wants to open a freestanding surgery center, with a few caveats. First, there will be no outside investors or surgeons outside of the current group. Second, they want to begin construction immediately to take advantage of lower building costs. Third, there were detailed questions about which cases are profitable and which are not, and no cases were forecast below a certain reimbursement level. Fourth, there would be out-of-network billing from insurance payers for as long as possible. Fifth, it would be managed like a business.
Potential client four. A hospital surgery center wants to joint venture with local surgeons. Nothing unusual, except the hospital will manage the center for the surgeons and charge higher market rates, with the rationale being that they understand the business. All goods and services the center uses must be purchased by the hospital, and all investors must be on staff with the sponsoring hospital and share ED call.
So these four encounters reveal an insight into where we are going. Here are my responses, in the same order.
One. Savvy investors are looking to the chaos that is health care and finding ways that insiders don't see to profit from the wave ahead of us.
Two. Some hospitals get it and are starting to plan for the inevitable. Our system is going to profoundly change. It will take a few years, but the change has started. The good news about the health care reform comes first with broader coverage. But a few years down the road, the price tag will raise its hideous head.
Three. Surgeons are becoming educated about the value of their surgical cases. They are starting to realize that they are the ones that produce the opportunities for the rest of us in this surgical world.
Four. Some hospitals just don't get it.
If you are wondering, we are doing three of the projects above. [Earnhart & Associates is a consulting firm specializing in all aspects of outpatient surgery development and management.]