In today’s healthcare environment, convenient access to ambulatory services is more important than ever before.
In part due to the introduction of value-based payment models that reward providers for lowering the total cost of care for patients, inpatient volumes in many markets have been flat or declining for several years. Success under value-based payment models requires effective population health strategies with a focus on providing the right care, in the right place, at the right time.
Through appropriately configured ambulatory services, hospitals and health systems at risk for the cost of care they provide can reduce emergency department and inpatient acute care utilization, while simultaneously growing market share and revenue. However, the shift to outpatient care will undoubtedly lead to increased competition as incumbent providers and new market entrants look to capitalize on changing market dynamics. Such competition will challenge organizations to achieve meaningful differentiation of their ambulatory services.
It is, therefore, important for hospitals and health systems to have a thoughtful and cohesive ambulatory care strategy, which includes, at a minimum, a well-distributed and high-performing network of physician practices, with a full array of outpatient diagnostic and treatment services. Such an ambulatory care strategy will be essential to position the organization for long term success.
Hospital leaders can ensure the success of their ambulatory care strategy by making sure it addresses each of the following four factors:
1. Optimize existing ambulatory facilities and services
Historically, most ambulatory care strategies have focused on adding new services and facilities, and converting those facilities to Provider-Based Status (PBS) so that they could receive reimbursement under the Hospital Outpatient Prospective Payment System (HOPPS), which paid better rates than those under the Medicare Physician Fee schedule (MPFS).
However, as of January 1, 2017, the law requiring site-neutral payments took effect, removing the higher reimbursement for services provided in hospital outpatient departments (HOPDs) unless the facilities comply with certain more restrictive conditions, such as being located within 250 yards of the main hospital campus. Facilities that were designated and billing as HOPDs prior to November 1, 2015 are not affected under the law, but facilities that were or will be newly acquired or built after that date and subsequently converted to a HOPD, and do not meet the new, more restrictive criteria, began receiving lower reimbursement as of January 1.
In the wake of increasing regulatory and reimbursement pressures on outpatient services, organizations need to maximize productivity and performance within their current ambulatory network, rather than simply opting to add capacity. Hospital leaders should assess their portfolio of outpatient services, patient utilization patterns, and the financial performance of existing ambulatory locations to determine whether current sites can be better configured or whether sites may need to be closed and consolidated with other locations.
Maximizing productivity could mean improving provider productivity, as measured by visits or WRVUs, or facility productivity, as measured by utilization of exam rooms and ancillary services. Of these, provider productivity is the more difficult to influence, and is best addressed in the context of incentive compensation design, but management can certainly ensure that clinical providers are practicing at the top of their license.
Facility use productivity can be assessed by reviewing appointment schedules and exam rooms at a given practice site. Underutilized exam rooms may indicate an opportunity to relocate or add new providers to the facility. The same logic can be applied to locations with onsite imaging or lab services. Other factors, such as geographic distance between sites, need to be considered, as in some places underutilized services may be providing important access to isolated communities.
2. Clarify your objectives when considering options to expand ambulatory services
It can be easy to lose sight of your overall objectives when you are “down in the weeds” of pursuing a new ambulatory initiative, such as building out a new ambulatory care center. What do you want the ambulatory care initiative to achieve for you? Geographic expansion? Market share growth? Protection against competitor encroachment? Meeting unmet needs in the market? Be sure the project aligns with the strategic direction of your organization.
Once your objectives are clear, hospital leaders can more effectively assess various options for achieving them, including alternatives that may be less capital intensive. For example, consider a hospital looking to provide greater access to specialty services in a remote community. While the hospital could lease or build a new facility and recruit specialists to provide services on a part-time basis, it could also explore opportunities to remodel or renovate existing facilities to allow for telehealth consults. Doing so would help to maximize physician productivity by allowing specialists in locations with excess capacity to provide services without requiring relocation or travel to provide care, and may prevent the need to recruit expensive and potentially underutilized specialty physicians.
3. Co-locate and integrate ambulatory services for convenient patient access
If your organization moves forward with developing a new ambulatory facility, consider the benefits of a “one stop shop” experience. Co-located and integrated services provide convenience for patients and providers, as well as operational efficiency and additional revenue-generating opportunities (e.g., retail pharmacy). Ideally, a new facility should have sufficient critical mass to support an appropriate mix of lab and imaging capabilities for the physician specialties located on-site. Co-location of these services will provide patients with convenient access to necessary diagnostics, and may even allow for same day testing. Timely access to test results facilitates quicker patient follow-ups and higher patient satisfaction – a key factor in building patient loyalty. However, note that co-location of specialties and ancillaries may not translate into a true one stop shop experience for the patient unless those specialties and ancillaries are integrated through their electronic medical record systems and/or centralized scheduling for appointments and services.
4. Design your ambulatory facilities to be flexible
When developing a new ambulatory facility (or updating an existing one), look beyond current needs and care delivery models to anticipate how emerging trends may impact your organization down the road. Organizations will continue to be challenged by aging populations, physician shortages, and flat or declining reimbursement. Many organizations also have an aging physician workforce that will only exacerbate local physician shortages.
Planning facilities for potential future expansion—whether that means building an extra wing or leasing additional space on the next floor—allows for future recruitment needs. Modular construction, with identical exam rooms and mobile specialty-specific equipment, makes it easy for part-time physicians in different specialties to share space. Appropriate internal construction techniques simplify combining exam rooms to create a procedure room, as demand requires.
New facilities should also be flexible enough to adapt to changing care delivery models. For example, as primary and specialty care visits increasingly incorporate team-based approaches to disease management, there may be a need to provide an increase in the amount of group meeting space for disease management programs. In addition, don’t forget to build in space and technology to support telehealth, eVisits and other newer modes of care delivery.
As the US healthcare system continues to identify ways to reduce spending and “bend the cost curve,” care will continue to shift to lower cost settings, and competition in ambulatory services will increase. To capitalize on the changing environment, hospitals and health systems must have a comprehensive ambulatory care strategy in order to effectively compete for market share. Organizations that can provide convenient patient access at low cost will be well-positioned for the future.
Carol Davis, MHA
Principal
Carol is an experienced project director with more than 15 years of experience working with hospitals and health systems, both as a consultant and health system administrator. She has led over 250 consulting engagements for community hospitals (including rural hospitals), health systems, and academic medical centers.
Ethan Liederman, MHA
Senior Associate
Ethan assists healthcare organizations with financial analysis, modeling, and business valuations. He has worked with academic medical centers, health systems, PHOs and IPAs.
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