In today’s healthcare environment, it’s more important than ever to have a well-streamlined ambulatory care network. Patients continue to favor outpatient service environments as insurance costs steer them away from hospital-based care.
And the pandemic has added an additional layer of aversion to hospital stays due to the risk of infection. Why risk COVID-19 for a simple knee scope?
While hospitals may continue to be the main economic engine for health systems for the foreseeable future, an optimized ambulatory network that functions in tandem with the main campus provides greater flexibility as community needs evolve as well as financial diversification for leaner times. It’s important to have both offensive and defensive elements in your strategy to secure market share, determine the right service offerings, and target a profitable payor mix.
Here are some best practices to make sure your ambulatory care plan is flexible enough to take advantage of opportunities as they arise.
As a health system or physician group expands through acquisition or planned growth, often inheriting duplicative sites, they may find that their network is not optimal for serving the community. Smaller locations with only a handful of physicians may no longer be strategically or economically viable, while population and demographic shifts may mean an older location no longer fits the demands of the market.
“Use this as an opportunity to step back and evaluate the entire network,” advises Sam Sears, EVP of Percival Health Advisors, Remedy’s in-house strategic innovation and advisory firm.
“Look at market conditions around each facility and the spectrum of services offered, as well as what the competition has done and what they plan to do, and perform a gap analysis to determine how best to adjust your network.”Sam Sears
EVP, Percival Health Advisors
As you conduct your review, consider how each location fits into your overall strategic plan and what its strategic driver is. For instance, does it fill a defensive or growth role? Is the location serving a key new submarket or designed to block competition? In addition, think about your service line strategy and opportunities for competitive positioning of your offerings.
Sears recommends putting each of your locations into one of four buckets:
It’s also important to consider whether there is room at a given location for expansion, either by leasing adjacent space or increasing the building footprint—and, conversely, what the options are if you need to reduce your footprint down the road. Depending on your strategic needs, leasing space may be preferable to development in a particular submarket.
A real estate partner like Remedy can help you act on this analysis by purchasing properties to provide liquidity or alleviate the burden of repositioning; developing new buildings; assisting with site selection; aiding in shifting strategic square feet from one property to another; offering generous TI allowances to expand and enhance leased locations; and other accommodations.
Quantitative market prioritization analysis identifies which target zip codes offer the highest growth opportunity within the market in a fact-based, mathematical manner. The results highlight which markets are most attractive while providing the best opportunity for a health system to be successful competitively. Priority ranking can guide organizations to consider investment in a market, and the relative ranking reveals the potential opportunity of each zip code to give decision makers an objective look at prospective sites.
Percival uses a mix of criteria in its market prioritization analyses, including a number of quantitative and qualitative factors such as socio-economic rankings, population health indicators, estimated patient medical volumes, and the overall competitive landscape. The specific factors used for a particular project, as well as their associated weightings, are selected based on the unique market dynamics of the region—such as provider relationships, regulatory considerations, and community involvement and perception—as well as the priorities of the client.
“We’re taking a very thoughtful, healthcare-centric look at a market and attempting to understand where the healthcare hot spots are,” Sears says. “For instance, how much are outpatient visits expected to grow over the next five years in this zip code? Do certain service lines present better opportunities than others? Is your market share in a strong, promotable position or will it just lead to cannibalization?
“To determine optimal placement, consider access, community size, competitive and physician dynamics, and growth potential for each facility through a market prioritization analysis. Also consider where consolidation will create better efficiencies, financial value, and critical mass to support referrals and ancillary services. With the pandemic, we may see an acceleration of consolidation in order to fit the needs of the market and create the most efficient network possible,” Sears notes.
Because every submarket is unique, it’s important to avoid a cookie-cutter approach and customize your strategy to reflect the conditions on the ground. “No submarket exists in a vacuum. You need to not only be looking at your services and continuum of care, but also at the entire submarket holistically,” says Ted Carson, EVP of Percival Health Advisors. “If you put all the providers together, including your competitors, where is the submarket being adequately served, where is it underserved, and where is it overapplied? Because that affects profitability and what payors are willing to cover.”
For example, in a self-contained market, an ambulatory care center may pull in patients from farther away. A competitor may see an opportunity to steal market share by placing a new facility with similar services in the middle of the community, where drive times would be shorter. In such a scenario, a flanking strategy could be an effective countermeasure. Place a second location on the opposite side of a town with complimentary services, and you’re able to serve the middle as well as capture more business from outlying areas—all while outmaneuvering and reducing opportunities for competitors.
In other situations, there may be an opportunity to co-locate with an existing healthcare provider in order to penetrate a new market. For example, a health system in the Washington, D.C., area was interested in creating a presence in a nearby bedroom community, but would not have a large enough patient base initially to make a standalone office viable. Percival facilitated conversations with a large independent primary care group in the market that was interested in expanding with a new medical office building.
“Co-locating with the biggest primary care group in the area allowed them to establish a beachhead in a part of their market they otherwise wouldn’t be able to support.”Ted Carson
EVP, Percival Health Advisors
“The benefit for the health system was a robust pipeline for referrals, and the physician group gained access to specialists and ancillary services like imaging and diagnostics.”
A variation on this strategy is to partner with a high-profile specialty group that is looking to enter or expand in your market. For the high-profile group, a joint venture may be attractive because they’ll gain access to a referral base as well as service lines outside of their specialty, while the health system benefits from the greater critical mass, a bigger site, and higher visibility and prestige of the association. Learn more about these and other physician alignment strategies.
Another creative approach is to cultivate a deeper connection with the market by offering amenities and services that extend into the community. Through a deep-dive qualitative assessment for a new ambulatory care center (ACC) in Florida, Percival learned that the prospective site of a new ACC was very family oriented and interested in sports and fitness. We therefore recommended a new vision for the ACC and collaborated with the client to develop an innovative new concept that integrates traditional health care services with wellness activities including fitness classes, nutrition education, and like-minded retailers to promote healthy living. The green, open campus also includes a half-mile walking trail, a serenity garden, and free parking and valet—and the facility hosts a monthly farmer’s market, further cementing it as a focal point for the community.
Percival Health Advisors was formed by a group of experienced healthcare consultants with a passion for thought leadership within the healthcare industry, and is the in-house strategic innovation and advisory firm of Remedy.
We partner with health systems and physician groups to identify growth opportunities and optimize market and service line strategies with a proprietary combination of rigorous analytics and facilitation that incorporates our national, regional, and local experience. With unsurpassed depth and a consistent record of success, our team is equipped to formulate and implement strategies and to ensure that operations are as efficient and well planned as possible.
Please get in touch to learn how Percival may help your organization optimize its ambulatory care footprint.