Publisher’s Letter (December 2006)

Welcome to Outpatient Nation

OH YEAH, WE ALSO HAVE ACUTE-CATE HOSPITALS

Dear Reader:

Welcome to Outpatient Nation.

I read with interest the article in this edition regarding how eight-hospital Carilion Health System in Virginia is repositioning itself as a network of clinics – a physician-led, multi-specialty group practice, to be exact. (Please see “System shifts focus to outpatient care” on Page 4.)

The hospitals will stay open after the restructuring, Carilion officials say, but they will apparently play a secondary role to the clinics, including a new “flagship” clinic and medical office building (MOB) project.

The move is controversial, but not unprecedented – and long overdue.

Hospitals used to be the undisputed heart of healthcare. But the inexorable shift to outpatient care during the past three decades is well documented. I’ll spare you the demographic, psychographic, economic and regulatory reasons for the shift; you’ve heard them many times before.

But what’s interesting about Carilion’s strategy is the change in perception. Sure, the Mayo, Cleveland and Lahey clinics have operated under this outpatient-centered model for many years. However, they’re among the most sophisticated, research-based healthcare providers on the planet. Of course they’re going to be progressive.

But it’s obvious that times have changed when mid-sized, small-market systems like Carilion start to position themselves in the marketplace as outpatient-centered.

Of course, patients have known this for years. Take your friendly neighborhood newsletter publisher, for example. I am 46 years old. I have had numerous medical exams over the years, as well as some routine imaging, the usual tests and even a couple of minor surgical procedures. But I have been a hospital patient exactly once: when I was born in 1961.

My experience is not unique. We have moved to a healthcare system in which many people will be patients in a traditional acute-care hospital only once in their lives: when they’re born. (Or, in the case of mothers, they will also be patients when they give birth – although who knows how long even that that will remain true.) Many of us will bypass acute-care hospitals even at the end of life, living out our days in senior living facilities.

Some would argue that an inpatient-focused positioning still makes sense because well-regarded hospitals have a halo effect on a system’s outpatient facilities. But that’s like saying that Mercedes-Benz has a halo effect on all of Daimler Chrysler’s vehicles. The reality is that if I’m driving a $15,000 Dodge day in and day out I really don’t care if the parent company also makes a $450,000 Mercedes that I’ll never own.

Likewise, if 99 percent of the healthcare you receive in your lifetime is delivered in an outpatient setting, are you more concerned about the quality of care in the outpatient facilities you visit regularly, or in the hospital where you’ll probably never set foot? In light of that, it has never been more important to deliver top-quality outpatient facilities.

Can systems like Carilion successfully reposition themselves as outpatient-focused? That depends in large part on the healthcare real estate firms that develop, finance, own, lease and manage those facilities.

Murray W. Wolf, Publisher