Aurora Health Care's pharmacies, where the health system also stocks exercise equipment, weights and medical supplies for commercial sale, competes across its Wisconsin markets with national retail drug stores for customers.

“It's a public retail pharmacy,” says Sue Buettner, senior vice president of planning and innovation at the Milwaukee-based system with a dozen hospitals.

The for-profit enterprise also is only one of Aurora's ventures that extend the health system's operations and revenue well beyond outpatient visits and hospital stays. For Aurora, such businesses—which also include retail clinics and laboratory joint ventures—amount to more than $150 million in assets and a boost to its income, though marginal.

Hospitals and healthcare systems, scrambling to prepare for an expected influx of newly insured and a steady stream of changes to healthcare financing, have looked more closely at core operations since the 2010 health reform law was enacted. But a review of investor disclosures and tax records offers a glimpse at ancillary and alternative services—some more than others—run and owned to varying degrees by not-for-profit organizations.

Some operations are closely related to healthcare delivery, as are Aurora's retail pharmacies, convenient-care clinics and laboratory outsourcing services. Some are complementary. According to the American Hospital Association, slightly more than one in 10 acute-care hospitals owned a stake in HMOs in 2009, the most recent year for which figures are available. Roughly 14% reportedly own PPOs and another 5% fee-for-service health plans.

Other operations include more distantly related services, such as real estate management, fitness centers, even hotels and construction companies.

But if some have embraced such secondary operations, others have exited ancillary service lines. One recent survey suggests hospitals may be increasingly outsourcing pharmacies. Meanwhile, AHA data show a drop in hospital-owned health insurers.

Janice James, a managing director for Huron Consulting Group, says hospitals and health systems continue to weigh the strategic value of owning versus leasing medical office buildings.

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Hospitals looking to raise cash and investor appetite for healthcare real estate has prompted a recent wave of dealmaking (March 7, p. 6). Some have opted to “get out of the real estate business,” James says.

Aurora's diversified business model raises the health system's profile among potential patients, Buettner says. More important, the broader array of services means broader access to what patients need to manage their health. “It really is part of the whole mix of taking care of our patients,” she says.

Buettner, whose job includes hiring not only pharmacists but retail merchandisers, marketing and communication professionals, says the system's pharmacy strategy gives patients more convenience and insurers better value.

Aurora's drug stores have access to patients' medical records, and pharmacists can provide medication therapy management, which can help improve health and lower costs, she says. Pharmacists can recommend less-costly generic medicines; check to see if patients take their medications as prescribed and field questions about side effects. Better compliance with prescriptions can also help prevent unnecessary hospital visits and lower healthcare spending, she says.

Medication management is also a service for which insurers reimburse, she says.

Aurora's Quick Care, of which the system owns 10% and the Aurora Medical Group owns 90%, operates 10 primary-care clinics (including in Wal-Mart and grocery stores) with the “sole purpose” of expanding its primary-care services, not competing with its existing clinics, Buettner says. Quick Care clinics are open to the public and create access for those without established primary-care providers—patients who may become Aurora patients, she says. “We take all payers,” she says. “We take cash.”

Some operate at a loss, she says. The system reviews the Quick Care operations each year and evaluates their value not only on margins but on whether the clinics create potential new patients and help meet demand for those with limited access to care. For the year ended December 2009, Aurora reported a loss of $194,032 on its share of Quick Care. The system reported its share of the assets at $485,209.

Aurora also owns half of A2cl Services with Advocate Health Care, an Oak Brook, Ill.-based health system with 10 hospitals. The business sells laboratory services to independent doctors and hospitals, and provides testing services for its two owners, Buettner says. The large volume of tests gives the business an economy of scale and Aurora enjoys savings, she says.

Even as Aurora eagerly operates an extensive network of 82 pharmacies, hospitals elsewhere appear reluctant to adopt such a business model, particularly among mid-sized hospitals.

About 6% of acute-care hospitals outsource retail pharmacy, according to a 2009 survey by the American Society of Health-System Pharmacists. About 11% of hospitals with at least 200 beds but fewer than 300 beds outsourced their retail pharmacies.

The society asked for the first time about retail outsourcing that year, says Douglas Scheckelhoff, vice president of professional development for the pharmacist organization. News that hospitals and systems had started contracting with drugstore chains for retail pharmacy management prompted the new survey question, he says. The survey, conducted by mail and online, included roughly 550 respondents.

Meanwhile, hospital and system ownership of health plans has declined. In 2005, 670 community hospitals, or 13.6%, reported ownership in HMOs and 931 held a stake in PPOs, or about 19%. By 2009, the number of hospitals that owned HMOs and PPOs had declined to 587 and 693, respectively, while the overall number of community hospitals increased slightly (See chart).

James, of Huron Consulting, says the decision to rent rather than own and manage medical office buildings varies by market. Ultimately, hospitals and health systems are seeking property that will improve convenience and physician relationships from such deals. She has seen clients seek to exit real estate management for medical office buildings. “They tend to be a significant investment,” she says, and hospitals and systems can instead lease from real estate companies.

She says she sees little recent interest in businesses marginally related to healthcare delivery among her clients, which are health systems and hospitals seeking to improve operations ahead of large capital projects or to prepare for coming health reform implementation. Healthcare executives are closely scrutinizing operations for costs to prepare for the expected decline in reimbursement rates under health reform, she says.

Dr. Neeru Jayanthi, medical director of primary-care sports medicine at Loyola University Health System.

Not all uncommon ventures will immediately boost revenue, but nonetheless they can provide a return on investment, argues Dr. Neeru Jayanthi, medical director of primary-care sports medicine for Loyola University Health System, Maywood, Ill., which owns two Chicago-area hospitals.

Jayanthi, a competitive tennis player and certified teaching pro, directs the health system's newly created tennis medicine program, which Loyola announced in May. He describes the new venture as an investment in relationships and marketing that could attract new patients to his practice and his employer, Loyola.

“Name recognition is important,” says Jayanthi, who also is education committee chairman for the international Society for Tennis Medicine and Science.

Such gains can be hard to measure but should not be underestimated, he says. “You can't make a direct calculation,” he argues, but efforts to increase medical practice visibility yield indirect benefits.

The program offers on-court evaluations, video analysis and tennis-specific treatment. Jayanthi works with two physical therapists who have tennis expertise. He says he hopes to soon launch a regional tennis medicine conference.

Treatment will focus more on the mechanics or frequency of patients' games, he says. Injured players often return to working with tennis pros, but pros lack medical training. “Your pro needs to fix your form,” Jayanthi says. “In the end, it was easiest to be that person.”

Jayanthi, who says experience and enthusiasm were needed to launch such an effort, met with a billing manager to discuss reimbursement options. High demand may require him to begin charging for services he does not yet bill for, he adds.

Some strategies to boost nonoperating revenue have gained round in recent years. Even not-for-profit health system investment portfolios yield revenue from uncommon sources.

At the nation's largest private not-for-profit health system, officials have turned to Ascension Health's sizable assets for nontraditional means to raise cash.

In 2008, Ascension earned about $847,400 from the Catholic health system's decade-old venture-capital arm. The system and Oak Hill Capital Partners, a private-equity firm, announced in February plans to invest in distressed Catholic hospitals. Such investments are more common among health systems than they once were, but continue to be known as “alternatives” along with real estate and hedge funds (Feb. 21, p. 6). Other ancillary businesses appear more well established.

Nearly one out of three community hospitals operated fitness centers (29.7%) in 2009, the most recent year for which figures are available from the AHA. That almost rivals the percentage that own home health services (33%) and is only slightly more than the share that operated ambulatory surgery centers (26%).

In Texas, not-for-profit Baylor Health Care System's for-profit Baylor Health Enterprises includes the Baylor Tom Landry Fitness Center, a health club open to the public. One out of five Texas hospitals operates fitness centers. But Baylor's operations outside of healthcare delivery extend beyond fitness centers.

The system, based in Dallas, and subsidiary Baylor Health Enterprises operate Medco Construction, a Texas company that focuses on healthcare projects. Baylor Health Enterprises also operates other for-profits, including a retail pharmacy and two recently launched laboratory joint ventures: Med Fusion and ClearPoint Diagnostic Laboratories.

Baylor reported income from the for-profit Baylor Health Enterprises of $22.7 million for the year ended June 2009, and Baylor's share of its assets totaled $14.1 million. The health system, which owns 10 hospitals, finished the same year with income from operations of $246.4 million on operating revenue of $3.4 billion.

Baylor officials were not available for comment, a spokeswoman says.

Baylor holds a 25% stake in Med Fusion, which launched in May 2010 as an advanced clinical laboratory for healthcare providers and biotech and pharmaceutical companies. US Oncology, Texas Oncology and Pathologists Bio-Medical hold the remaining stake.

And in May 2011, Baylor and Pathologists Bio-Medical launched ClearPoint, a second joint venture. ClearPoint is a laboratory service company for Dallas and Fort Worth-area physicians.

“The joint venture is expected to create ready access to new advances in molecular and genetic testing for medical centers and pharmaceutical and biotechnology companies,” the health system said of Med Fusion in its financial filings.

The venture is also a bid to capitalize on an emerging segment.

“This endeavor leverages the new science of pharmacogenomics, which appears positioned for rapid near-to-intermediate term growth as drug companies develop treatments that target specific genes,” according to the system's filings.