Tuesday, April 10, 2007

Hospitals and Physicians - The “Big Box” and Hospital-Physician Integration

“Outside the Box” and “Inside the Box” Thinking

Read enough about innovation, or travel in innovation circles, and, soon or late, you’ll run across the phrase “thinking outside the box.” It means looking at a problem from a new angle without judging the answer in advance.

Thinking “outside the box” implies:

• A willingness to accept new views of a problem
• Openness to different things and to doing things differently
• Focusing on finding new ideas and acting on them
• Striving to create new ideas
• Listening to others
• Supporting and respecting others when they come up with new ideas
• Thinking big, thinking smart, and sticking with big smart idea.

A Contrarian Friend

I have this contrarian friend, Dr. Daniel Zismer, who is thinking big and smart by thinking “inside the box. ” Dan is turning the language of “outside the box” and “inside the box” upside down, or, if you prefer, outside in.

Generally, thinking “inside the box” means thinking traditionally , accepting the status quo, and being leery of new ideas. That’s not Dan. He’s been thinking inside a “Big Box” for over five years now, With the help of Frauenshuh, Inc, a health care real estate firm, and other visionaries, he foresees the building of “Big Boxes,” 50,000 to 250,000 square buildings integrating the economic and clinical interests of hospitals and doctors, and serving as market magnets for health-seeking and cure-seeking consumers, across the medical landscape.

Dan is executive vice president of Essentia Health, president of Essentia Health Services, and CEO of Essentia Health Consulting, which focuses on integrated health care. Essentia Health Consulting , is a service of Essentia Health – a 10 state affiliation of the Benedectine Health System (BHS) and the St. Mary’s Duluth Clinic Health System (SMDC). Dr. Zismer concentrates on integrating urban and non urban health systems, rural providers, and long term care facilities.

Chapter and Case

Dan is such a special friend that I devote a full chapter and a case study in Innovation-Driven Health Care: 34 Key Concepts for Transformation (Jones and Bartlett, 2007) to him and his pet concept – “Big Box” Ambulatory Care Centers.

To Dan, in an increasingly competitive health care environment with shrinking margins, the two main questions hospitals and doctors face are these:

Integration or disintegration? Unified vision or separate declines?

Dan’s answer is: join together, hospitals and doctors, as equity partners in large ambulatory care centers, large brick and mortar structures known as “Big Boxes.” Only a few of these “Big Boxes” now exist. But many, with the help of real estate developers, are in the planning stage and on the drawing boards. In time, big boxes may become as common as suburban shopping malls.

Frozen Tundra and The Great Plains

This concept is taking root in the frozen tundra of Minnesota and a swath of North Plains states (Idaho, Montana, the Dakotas, Minnesota, Wisconsin, Illinois, Kansas, and Missouri). This doesn’t surprise me Hospitals and doctors in those states have always huddled together against the cold and the winds sweeping across the plains in collectivist health care organizations – integrated hospital systems and large clinics – to protect and promote their mutual interests.

Simply The "Smart” Thing to Do

To Dan, a PhD in Business Administration, Big Box Ambulatory Centers are the only “smart” thing to do. He speaks glowingly and knowingly of Big Boxes as a “smart’ destination strategy, located in “smart” locations, exhibiting “smart” partnerships, thinking in terms of “smart” economics, using “smart” facility ownership and leasing, and featuring “smart” technologies, “smart” physician partnership design, with “smart” functionality with the patient at the center.

Thinking Big is Thinking Smart

Dan, in short, thinks thinking “big” is thinking “smart.” By consolidating, concentrating, and integrating hospital and physician interests in large, efficient, and visible buildings, hospitals and physicians can position themselves for lasting economic and clinical success. Hospitals can align themselves with specialists, their economic bread and butter for the future; physicians, multiple independent specialists and primary care physicians can align their interests and share space and equipment to deliver ancillary services while complying with Stark regulations; and patients will have a one-stop destination to which to go to receive the care.

Just a Real Estate Play?

Some of you out there may be thinking, this is just a real estate solution play, like the shopping malls that cropped up in the 1960s. You’re right. It will take real estate developers to make “Big Boxes” go. But, asserts Dan, these big centers are in also in the best economic, marketing, and clinical interests of hospitals, physicians, and health care customers. It’s also a good marketing bet. The public tends to trust large organizations to deliver social and health care services.

Current “Out of Box” Strategies Inefficient

To Dan, “out of the box” strategies appeal less. Maintaining the status quo, he maintains, is “less smart.” In the current system, he says facilities separately maintained by hospitals and doctors tend to be,

• Under or over built
• Inefficient to operate
• Waste capital
• Produce less than satisfying experiences for physicians
• Lead to strained relationships between doctors and hospitals
• Disappoint patients
• Do not attract the right markets.
• Turn over ownership quickly
• Allow little control for occupants
• Are less productive for the occupants.

“Big Box” General Strategy and Design Concept

Here, in Dan’s words, is his general strategy and design concept:

The “big box” ambulatory center is a 50,000 to 250,000 square foot ambulatory center, focusing principally on specialty diagnostics, therapeutics, rehabilitative, and restorative services, located either on the main campus of the hospital or strategically located in high-potential surrounding markets. While the facility is most likely a well coordinated collection of partnerships between the health system and high-vale specialist, the patient experiences a well coordinated, integrated, “system” of ambulatory care; a system connected by a common electronic record, as well as common registration. The system is promoted under a unified branding system lining the health system and participating physician “brands.” It is highly visible and strategically located. It is designed to be an” ambulatory services destination.”

While primary care and urgent care services may be offered as market attractors and internal referral generators (primary care physicians most likely employed by the health system) the larger measure of available space is dedicated to high dollar per-square-foot net revenue opportunities (imaging, diagnostics, invasive therapeutics, outpatient surgery, rehabilitative medicine and laboratory services, and, in some cases, freestanding emergency medicine services). The economics of the “big box” are dictated by clinical services selection, the size and configuration of the facility, and the mix of physicians. Facility and technology costs per-square-foot will likely range form $300 to $45 (excluding the cost of land).


Val said...

This sounds like a basic means for avoiding hospital bureacracy by just building another structure in which to operate (and focusing on the most lucrative procedures). Orthopedists are essentially doing this already (investing in outpatient centers with PT and imaging services in-house) for financial reasons. I don't blame them, but this will not necessarily improve quality of care. It will improve physician bottom lines and take away low hanging fruit from hospitals that are struggling to survive to serve the acutely ill.

Richard L. Reece, MD said...

You may have missed the point. Hospitals are partnering with specialists to retain or share a portion of revenues from these "lucrative procedures, " which currently make up 70 to 80% of their bottom lines. This is the hospital's way of "struggling to survive."