If you build it, they may not come

With the changes and incentives (often misaligned incentives) in play as a result of Obamacare, many hospitals and provider groups are hedging their bets that bigger is better. To that extent, some are attempting to leverage their brand outside of their catchment area in an attempt to secure more patients. The pitch to those communities receiving the new facility is often the same: “we bring an unparalleled level of expertise”, “extending the benefits of an academic institution”, “to better serve the residents”. The problem is that the community often becomes confused and questions what sort of care they have been receiving for decades before this new entity decided to ride in on their white horse and save us all. Equally important, the entire medical community is often upset for the same reasons, with physicians stating “So, I have been providing substandard care to my patients?”

Although this has not stopped hospitals and provider groups from expanding their arena in the past, it was not as widespread as it has been in the past few years. This is due to the Obamacare push to have fewer players in the healthcare sector, essentially easing into socialized medicine as some would declare. Either way, it is certainly an “in your face” push to shut down the solo and small group medical practices that have longstanding roots in their communities.

Last year, a university physician’s group in Florida entered a market nearly two hours away to offer specialty care such as cardiology, gynecology, and orthopedics. In just 6 months, they walked away from their $4 million investment. The center was tracking to be $2 million in the red during its first year, but the university is conflicted. On one hand, they are not happy about the loss, to which they acknowledged “due diligence could have been better.” On the other hand, they are still eager to jump into that remote community due to the population health initiatives being driven by healthcare reform.

In Indiana, a proton therapy center is closing after being in operation for 10 years. This Indiana center, which had a $3.5 million operating loss last year, cited several reasons for closing including changes in new payment models like bundled payments. The point here is not this center’s closing but rather the plethora of other proton centers still being built and planned for around the country. There are 13 such centers in operation, but 12 more are currently being developed. Perhaps there is going to be a demand to justify doubling the number of proton therapy centers in the U.S. And perhaps, clinical studies and payment reforms will be in favor of all this growth. Time will tell.

There is no crystal ball as to how U.S. healthcare reform will shake out. I believe that our entrepreneurial society which includes outstanding physicians and great business leaders will prevail and patients will be the benefactors, providing all continue to put the patient first. Nevertheless, examples abound in the healthcare industry that show us . . . If you build it, they may not come.


Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at ABISALLC.com.

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