Outpatient care is going to drive the market for the most part in 2015, according to Andy Lane, associate vice president at RTKL.
“There’s been a little bit more activity going into 2015 than there has been in the last couple of years, so that’s the good news. I think outpatient facilities are going to grow the market, and also facilities are looking for more strategic plans as far as how to consolidate service lines—amongst other things—to make themselves more operationally efficient.”
When it comes to outpatient facilities and ambulatory care, according to Lane, there are requests for planning efforts within health systems relative to addressing the outpatient model.
“The questions become what do you do with your existing in-patient campuses, how do you make them the right size, and is there a need to repurpose them? Or, how do you consolidate service lines between campuses if you’re a part of a larger system, so you do not have as many adjunct services?”
Changes in the way people seek medical care—they want more outpatient surgeries and less in-patient care, and they want smaller locations that are closer to them.
Lane noted that consumers—because of the way insurance is going with high-deductible insurance plans—are starting to get more and more cost conscience.
“You’re starting to see other business institutions enter the healthcare marketplace at different price points, like Walgreens, CVS, Walmart, and Target,” he said. “So there’s that entry-level price point for basic services, and then there are more robust services which stay within the larger health hospital systems—your ambulatory surgery centers, diagnostic centers and general practitioners go in that category.”
“You’re going to start seeing more and more of ambiguity amongst different players in the marketplace. Clearly, there is a need to enter the healthcare market at different price points depending on the type of continuity healthcare providers are trying to address.”
As for the mergers and acquisitions that have—and are—taking place in the healthcare market, Lane noted that are a few reasons as to why that is occurring.
“As healthcare systems become larger, they are able to negotiate better rates for their insurance providers,” he said. “Additionally, demand for population health is on the rise—which is when you try to take care of people when they are well opposed to when they are sick over a certain geographic area.”
“The goal is to reach those patients in a continuum of care, versus just once when they come to the hospital and are sick,” Lane added.
Lane noted that the larger systems have more resources to do that and can absorb some of the overhead as a result.
“They also have a better geographical footprint to do so,” he said. “In Chicago for instance, there used to be four or five hospitals, maybe within five miles of each other, all competing for the same patient population.”
“Over time, those hospitals started to specialize on certain services because they all couldn’t do everything, and they needed to be able to take care of more people, more efficiently.”
Lane said he believes that there are some probable strategic reasons as to why some health systems are merging or allowing themselves to be acquired by the larger health systems.
“There are still some arguments in outlying areas where you might want to stay independent,” he said. “But in some of the more rural communities, sometimes they find it difficult to find someone to come in and make them a part of their system because they do not have the volume, so they have to stay independent.”
“Yet certainly a healthy, independent hospital that is getting a lot of attention from a larger system may do so because they want to keep increasing their reach,” Lane said.
Lane’s expectations for the market in 2015 is that activity will be slightly up. “I don’t think we’re going to see a dramatic surge in volume, but I will say that I’ve been having conversations with industry figures around the city, and they all seem to have a lot of deals they are trying to put together.”
“I think it’s reinforcing the point that most of the activity is going to be in the outpatient market,” he said. “Healthcare systems themselves, while they are doing things, seem to be more in the planning side of things now and smaller projects. So the big replacement hospitals with bed tower expansions—while they may be happening, they seem to be more repurposing projects.”
Today’s healthcare market has certainly evolved from what it once was, say thirty years ago. So for those who are wondering where the market is going from here, Lane said he thinks there will be a greater focus on health and wellness and providing the right care that is convenient and accessible.
“There will be more consolidation of systems, and I think those systems are going to be a little more streamlined as a result of what services are offered and where,” he said. “They’ll be a little more strategic about what services they put on what street corner so to speak.”
Lane also noted that the market will start to see the continuation of getting the right types of facilities, with the right type of providers, at the right locations for the right demographics.
“What those will be remains to be unknown, “he said. “But getting the right facility at the right price point for the patient is going to be critical because they are going to have options now that more people are becoming insured due to the Affordable Care Act.”
“They have choices now as to where they can go to receive care,” Lane continued. “Also, if they are in high-deductible insurance plans, they are going to be very cognizant of what’s the most affordable option to receive care. You’re going to start seeing a bit more transparency in pricing.”
As for the Affordable Care Act, and its effect on the market, some people are happy and there are some who aren’t. Lane said he believes it’s in a “wait and see” period.
“I know that depending on the institution that you are in, some institutions who have more of a challenge with their demographics are certainly thinking that it’s going to help their business model. Those institutions that had a pretty good pair mixed to begin with aren’t that excited about it, which is understandable as well.”
“So how it all shakes out at the end of the day, I don’t know,” he said. “But I do think it’s always good for people to have options to get healthcare.”
