A Prescription for the Free-Standing ED Kimberly Nealon, St. Vincent Health; Steve Mombach, TriHealth; John Marshall, BremnerDuke Healthcare
Agenda I. Introductions: Kim, Steve, John II. III. IV. Market Conditions: Trends & Demographics Health System Strategies Financial and Development Implications V. Physician/Community Alignment VI. Summary: Lessons Learned Sources Used: AHA, HFMA, Bank of America, Healthleaders 2
Section II Market Conditions: Trends & Demographics 3
Why the Free-standing Emergency Department? Internal Market : Hospital/System Shorter patient wait times Greater access to care/different care provided Reduction of hospital overcrowding Ambulance Diversion Revenue diversity/growth Patient/customer satisfaction Capital constraint at inpatient acute care facilities/health system Physical cost/challenge of ED expansion/ renovations Physician alignment strategies Market Competition External Market : Public/People/Users Greater access to care Expansion of brand and market share in growing suburbs Outmigration of care trend Revenue diversity/growth Patient/customer satisfaction Competition from Retail Clinics Brand or Hospital Loyalty Physician alignment strategies Haves/Have nots If you build it... Physician alignment 4
Number of ED Visits (Millions) Emergency Departments Visit Increase, Provider Decline: The ED Paradox Emergency Department Visits and Emergency Departments (1) in Community Hospitals 1991 2007 ED Visits Emergency Departments 120 115 110 105 100 95 90 85 5,300 5,100 4,900 4,700 4,500 4,300 4,100 3,900 3,700 80 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 3,500 *2007-2009 saw 12% increase in ED Utilization; virtually no growth in hospital-based physician visits. (2) Source: (1) Avalere Health analysis of American Hospital Association Annual Survey data, 2007, for community hospitals. (2) Thomson Reuters 5
The Outmigration of Care Outpatient related services continue to grow as the baby boomers age Predicted 30% growth of retail clinics from 2012-2014 60% growth of hospital participation in retail clinics since 2008 55% of hospital executives to maintain or grow OP services to meet continued consumer demands - Outpatient related services generate higher EBITDA margin than inpatient... 10-35% higher (dependent upon procedure/service) However, hospital profits erode if the OP and IP services are operating in Silos.... Sources: HFMA, Future of Healthcare Finance, January 2010 6
Section III Health System Strategies 7
St. Vincent s Objectives Capital Preservation Further implementation of interstate locations strategy Expand presence in Hamilton County Maintain and grow market share in a rapidly expanding suburb Achieve first to market status at Exit 10 Develop first free standing emergency department in Indiana Off Balance Sheet Test the water for future acute care setting Physician alignment: JV in real estate and ancillaries 8
St. Vincent Northeast Medical Center: A Case Study 9
St. Vincent Medical Center Northeast - Highlights Total Square Feet 120,000 rsf Number of Floors 3 St. Vincent Pre-Lease 85,000 rsf (71%) Primary Uses ED, Imaging, ASC Secondary Uses Pediatrics, Breast Center, Stress Center, Sleep Lab, PT, Women s boutique Total Project Cost (DSM) $31,695,259 (Core/Shell, Standard and Above Standard TI ($264.13/rsf) 10
Fully Developed Campus Plan 11
Location Map- St. Vincent Medical Center Northeast Riverview Hospital St. Vincent Medical Center Northeast St. Vincent Carmel St. Vincent Community Hospital Methodist Hospital Community Hospital 12
TriHealth Ambulatory Strategy Provide convenient, accessible services in strategic locations throughout the community Provide readings of images and diagnostic tests by the same experienced professionals located in our hospitals Provide accessibility of images (records) electronically linked with our hospitals and physician offices Meet acceptable profitability targets as an independent line of business Maintain or increase market share for both inpatient and outpatient business units Create appropriate strategies to compete in this competitive environment
Clinical Program Objectives for Western Ridge Hospital Services Emergency Department Services similar to any hospital Emergency Room Physicians (24/7) ED nursing team same as any TriHealth hospital Helipad for emergency out-going situations Comprehensive Imaging X-ray Computed tomography (CT) Ultrasound DEXA scan Mammography MRI space for future implementation Laboratory Services (24/7) Other Services Including EKG Pulse Ox checks Halter Monitor
Good Samaritan Medical Center Western Ridge Highlights Total Square Feet 50,000 rsf Number of Floors 2 Pre-Lease 45,000 rsf (90%) Primary Uses Secondary Uses Total Project Cost ED, Imaging, Lab Physicians Internal Medicine, Pediatrics, Specialty $_~$11,000,000 (Core/Shell, Standard and Above Standard TI ($220/rsf)
Development slide
GSH Dependence 48%of GSH IP Volume comes from the west side markets (2006)
Section IV Financial & Development Hurdles 20
Hurdles/Issues Access to capital General constraint and competition (IP needs; Physician employment; etc) Off-Balance Sheet scrutiny General development costs infrastructure complications, site complications Competitor(s) expansion or new construction into same submarket Convincing physician groups to expand practices in this market Regulatory/CMS hurdles 21
Capital Challenges Percent of Hospitals Reducing Expenditures on Capital Projects because of the Capital Crisis Beginning Early in 2008 Source: AHA. (March 2009). Rapid Response Survey, The Economic Crisis: Ongoing Monitoring of Impact on Hospitals. 22
Capital Challenges Percent of Hospitals Reporting an Increase in the Degree to which Physicians are Seeking Financial Support from Hospitals Since Economic Conditions Began to Deteriorate in September 2008 Percent of overall citing type of support sought Source: AHA. (March 2009). Rapid Response Survey, The Economic Crisis: Ongoing Monitoring of Impact on Hospitals. 23
BremnerDuke Roles Equity Source for Client Site Selection & Expertise Site Planning/Site Challenges Maximize public Incentives TIF Guarantee Deal Structure Leasing Construction Manager Provide all necessary project capital Use market knowledge and experience to secure ideal site with high visibility without paying a premium Lead evaluation on site utilization for medical uses and dynamic infrastructure problems and site control issues. Use land development experience to maximize incentives from county and town Use Duke balance sheet strength to guarantee TIF bonds Achieve off balance sheet treatment for St. Vincent without taking significant lease-up risk. *Creativity for joint ownership Assisted St. Vincent in communicating the vision for the facility to prospective physician groups and evaluated prospective interest to right size the building Coordinated fast-track design and cost estimating 24
Section VI Summary: Lessons Learned 25
Timing Is Everything ED MOB Development Timeline & Expertise Cross Train the Staff Staff Minimally Hospital/Physician Alignment & Capital Creativity Hospital shared facility ownership Physician shared facility ownership Community Alignment Expanded healthcare services in respective communities Clinical differentiation from Urgent Care & Providing more convenient care to current patient base Clarify/Definition for EMS providers Likelihood of Acute Care beds in near future TIF growth: commercial development 26