There are no bad service lines, says David Anderson, a managing director at BDC Advisors in San Francisco, but each specialty poses particular challenges. Here he describes some of the challenges associated with 10 service lines.
1. Pediatrics. This can be a very effective service line. Most children's hospitals do quite well, because people prefer to send their very sick children to a children's hospital. He says high volume is key. Clinical studies have shown that pediatric operations in hospitals with a relatively low volume of pediatric patients have poorer outcomes than those in pediatric hospitals.
2. Obstetrics. While obstetrics typically loses money, it can be balanced with neonatology, which pays well. Women's services also tend to be low-paying except for surgical procedures. Most of the remaining women's hospitals have joined health systems, such as Magee Women's Hospital, now part of UPMC in Pittsburgh, and Rose Medical Center of Denver, now part of HealthOne.
3. Orthopedics. With the price of implants taking up an increasingly larger piece of total reimbursement, orthopedics is challenging for hospitals and better suited for outpatient facilities. HOPDs and ASCs can be successful here as long as they are economically aligned with all orthopedic surgeons, including non-investors who have fewer financial incentives. Sometimes non-investor surgeons resist choosing less expensive devices and admit patients at the hospital, as long as it is in the patient's best interests.
4. Cancer. A large number of subspecialists are required for cancer, including medical oncologists, radiation oncologists, surgeons and urologists. Hospitals that perform well with cancer services have assembled the full team of physicians, achieved a great reputation and posted high volumes.
5. Heart. Cardiac and cardiovascular service lines involve just a few key specialists: cardiologists, cardiac surgeons and perhaps vascular surgeons and anesthesiologists. Reimbursement is good and the principal challenge is intense competition from other centers for patients.
6. Bariatric surgery. These programs are heavily scrutinized by regulators and reimbursement requires certification. A hospital may initially lose money because it needs to show good outcomes on unreimbursed cases before it can be certified. On the other hand, bariatric surgery can be combined with other specialties, such as general surgery, endocrinology and nutrition, to create a comprehensive weight-loss service line.
7. Digestive disease. This is a large, profitable service line but it's still relatively rare because it overlaps with cancer and it can be difficult to bring together all the pieces: gastroenterologists, general surgeons, colorectal surgeons and potentially nephrologists and hepatologists.
8. Neurosurgery and neurology. This service line rarely has enough volume to support a whole specialty hospital, although there are exceptions, such as Barrows Neurological Institute in Phoenix.
9. Transplant centers and trauma programs. While these are limited to major academic centers, they should also be considered service lines.
10. Smaller service lines. Urology, plastic surgery, in vitro fertilization and mental health are largely outpatient fields that are becoming more important as hospitals shift away from inpatient care. Hospitals may also develop new service lines around chronic diseases like diabetes, asthma and congestive heart failure.
Reach David G. Anderson at danderson@bdcadvisors.com
1. Pediatrics. This can be a very effective service line. Most children's hospitals do quite well, because people prefer to send their very sick children to a children's hospital. He says high volume is key. Clinical studies have shown that pediatric operations in hospitals with a relatively low volume of pediatric patients have poorer outcomes than those in pediatric hospitals.
2. Obstetrics. While obstetrics typically loses money, it can be balanced with neonatology, which pays well. Women's services also tend to be low-paying except for surgical procedures. Most of the remaining women's hospitals have joined health systems, such as Magee Women's Hospital, now part of UPMC in Pittsburgh, and Rose Medical Center of Denver, now part of HealthOne.
3. Orthopedics. With the price of implants taking up an increasingly larger piece of total reimbursement, orthopedics is challenging for hospitals and better suited for outpatient facilities. HOPDs and ASCs can be successful here as long as they are economically aligned with all orthopedic surgeons, including non-investors who have fewer financial incentives. Sometimes non-investor surgeons resist choosing less expensive devices and admit patients at the hospital, as long as it is in the patient's best interests.
4. Cancer. A large number of subspecialists are required for cancer, including medical oncologists, radiation oncologists, surgeons and urologists. Hospitals that perform well with cancer services have assembled the full team of physicians, achieved a great reputation and posted high volumes.
5. Heart. Cardiac and cardiovascular service lines involve just a few key specialists: cardiologists, cardiac surgeons and perhaps vascular surgeons and anesthesiologists. Reimbursement is good and the principal challenge is intense competition from other centers for patients.
6. Bariatric surgery. These programs are heavily scrutinized by regulators and reimbursement requires certification. A hospital may initially lose money because it needs to show good outcomes on unreimbursed cases before it can be certified. On the other hand, bariatric surgery can be combined with other specialties, such as general surgery, endocrinology and nutrition, to create a comprehensive weight-loss service line.
7. Digestive disease. This is a large, profitable service line but it's still relatively rare because it overlaps with cancer and it can be difficult to bring together all the pieces: gastroenterologists, general surgeons, colorectal surgeons and potentially nephrologists and hepatologists.
8. Neurosurgery and neurology. This service line rarely has enough volume to support a whole specialty hospital, although there are exceptions, such as Barrows Neurological Institute in Phoenix.
9. Transplant centers and trauma programs. While these are limited to major academic centers, they should also be considered service lines.
10. Smaller service lines. Urology, plastic surgery, in vitro fertilization and mental health are largely outpatient fields that are becoming more important as hospitals shift away from inpatient care. Hospitals may also develop new service lines around chronic diseases like diabetes, asthma and congestive heart failure.
Reach David G. Anderson at danderson@bdcadvisors.com