Step onto the fourth floor of Community Hospital in Springfield, Ohio, and you enter an entirely different institution.
Visitors are greeted by a sign reading "Arthur G. James Cancer Hospital and Research Institute." The main James hospital is actually 45 miles away in Columbus, Ohio, but it has spawned a miniature version of itself inside the community hospital, where it leases space and buys services such as laundry, laboratory and imaging.
The 107-bed cancer hospital is among a handful of specialty hospitals that are experimenting with a twist on the merger-and-affiliation theme: establishing inpatient satellites at other hospitals.
In an era of heightened financial pressure, satellites allow specialty hospitals and their physicians to expand geographic reach without sinking money into bricks and mortar. Likewise, community hospitals generate revenues by leasing excess space and selling ancillary services, as well as boosting their image with a prestigious affiliation.
No one keeps an exact count of inpatient satellites, but the number is believed to be small. However, more hospitals are launching them. For example:
* In July, UCSF Stanford Health Care's Lucile Salter Packard Children's Hospital in Palo Alto, Calif., opened a six-bed Level II neonatal intensive-care unit at Sequoia Hospital in Redwood City, Calif. The unit is modeled after a similar six-bed facility it opened at Washington Township Hospital in Fremont, Calif., in 1996.
* In August, Children's Hospital in Columbus signed a letter of intent with Columbus-based OhioHealth to open neonatal intensive-care units with a total of 48 beds in three OhioHealth hospitals.
* James opened its Springfield site in January and has been negotiating to lease space at two other community hospitals. It plans to operate as many as four satellites.
Community benefits. Such satellites represent a can't-miss opportunity for a community, says Charlene Hill, a spokeswoman for the Joint Commission on Accreditation of Healthcare Organizations. "It's often specialty hospitals offering a service that normally the community wouldn't have access to right there in the neighborhood."
Satellites generate good will among local physicians, which translates to referrals. Lucile Packard experienced a 60% increase in referrals from the Fremont area since it opened its neonatal ICU there three years ago, says Michael Thomas, vice president of strategic planning at UCSF Stanford. "It allowed us to facilitate relationships that until that time we had a difficult time fostering," he says.
And it's profitable, unlike traditional affiliations in which a teaching hospital sends a faculty physician to manage a unit at a community hospital, he says. Usually, the community hospital pays a stipend that doesn't cover even the cost of that physician's salary, Thomas says. "We lose money on almost all of those relationships. One of the reasons we like the (satellite) model is that it does allow us to participate in the institutional revenues."
Lucile Packard has had to find new ways to maintain relationships with medical staffs of competing community hospitals, however. "If we're doing a neonatal venture at one hospital, we might be willing to send a gastroenterologist, an oncologist or other specialists to the other hospital," Thomas says.
However rewarding, opening a satellite is a tough trick to pull off. Deals are complex to negotiate, and community hospitals and their physicians sometimes are reluctant to give up control of specialty care.
Also, government regulations discourage integration between host hospitals and satellites. In some cases, hospitals argue, government rules hinder efforts to streamline care.
HCFA, worried that specialty hospitals were using satellites to game the Medicare payment system, recently enacted rules to ensure satellites are governed and operated separately from their hosts (See story, below).
In Springfield, James officials say they took every measure to convince physicians, patients and the government that the satellite is part of their institution. It took two years to reach an agreement that was profitable for both hospitals and agreeable to HCFA, says Thomas Baxter, James' director of network development. Some complication stemmed from the fact that Community is private, while James is state-owned.
Branding. James symbols are everywhere in the 12-bed unit, called James at the Community Hospital. A color photo of the main building, on the campus of Ohio State University, hangs prominently in the lobby. James logos are on patient doorways. A statue of a woman releasing doves, which resides on the James front lawn, is represented on a glass entryway. Even the color scheme and the design of the nurses station mimic those at the main building.
But the ties go beyond appearances. For purposes of Medicare billing and accreditation, the floor is part of James, one of 35 comprehensive cancer centers designated by the National Cancer Institute. Nurses and technicians in the unit are trained at James. Physicians bear James credentials and use James protocols. Patients are billed by James.
But the hospitals encountered unanticipated wrinkles. For example, under HCFA rules, patients who need to be transferred to an intensive-care unit following surgery must be discharged from James and readmitted at Community, which operates the ICU. It's inconvenient for physicians and confusing for patients, who "wake up from surgery and they're not in our hospital anymore," Baxter says.
He says the hospital has been trying to make a case with HCFA that patients who stay in the ICU for less than a day should not have to be officially transferred.
The hospitals also didn't anticipate how difficult it would be to get physicians and their staffs to understand the concept of a satellite.
For several months after the unit opened, oncology admissions continued to flow to Community Hospital, thwarting financial projections for the satellite.
Admissions at the satellite increased to projected levels after an education campaign in the medical community. Part of the problem was that until physicians saw the unit in operation, they were skeptical, says Chris Brouhard, vice president of integrated services at Community. "They thought we just renamed the floor," he says. "But when they got up there, they found that it is not Community Hospital."
Lowering costs. James' primary motivation for establishing satellites is to enlarge its patient population for clinical trials, Baxter says. In addition, treatment at satellites is expected to be less expensive than treatment downtown, in part because there is less competition for trained workers in outlying areas, he says.
Based on 2,628 admissions per year, projections are that the Springfield satellite will cost $1,155 per patient per day vs. $1,750 at the main campus.
In addition to a three-year lease, James has a separate agreement to purchase laboratory, pharmacy, radiology and surgical services from Community, whereby James pays the local hospital a percentage of its charges.
One challenge was training nurses and technicians. New staff members must commute to Columbus for several weeks for training sessions. However, says Jan Sirilla, nurse manager of the James satellite, "most of them are so excited about working on this unit that they don't mind."
The contracts are expected to shield Community from Medicare cutbacks, Brouhard says. By keeping more patients in the community for care, Community expects to exceed the $1.5 million in annual profits it historically generated from inpatient cancer treatment, he says.
But Brouhard adds, "The primary reason for doing this was to enhance cancer services." For example, he says, Community's rehabilitation specialists have received training from the cancer center. "We feel this is just the tip of the iceberg."
Coincidentally, Brouhard became one of the satellite's first patients. He declined to disclose his diagnosis.
The Springfield satellite inspired Children's in Columbus, whose ICU is filled to capacity. Operating within OhioHealth facilities will allow it to double its neonatal ICU capacity without the estimated capital investment of more than $30 million to add space at its main campus, says Patricia McClimon, Children's director of planning and business development.
The hospitals plan to leverage the Children's brand name with a joint marketing campaign. The on-site neonatal ICUs at OhioHealth could eliminate some transfers to the Children's campus, reducing risk and creating a sense of security for expectant mothers, McClimon says. "We feel this is an innovative way to make sure patients and families are getting the best possible care," she says.
Existing satellites bolster these optimistic projections. For example, Spalding Rehabilitation Hospital in Aurora, Colo., owned by Columbia/HCA Healthcare Corp., has operated within two Denver acute-care hospitals: 22-bed Rose Medical Center since 1993, and 22-bed Presbyterian St. Luke's Medical Center since 1994.
The Spalding facilities are profitable and enable patients in the sprawling Denver metro area to obtain treatment closer to home and closer to their primary-care physicians, who are integral in the care, says Chief Financial Officer Joyce Speakman.
In a variation on the theme, Children's Hospital of Orange County in Orange, Calif., operates a sister facility under a separate license, but with identical management, inside Mission Healthcare Regional Medical Center in Mission Viejo, Calif. President and Chief Executive Officer Kimberly Cripe credits the arrangement, begun in 1993, with expanding its market share and boosting patient and physician satisfaction.
Still, no one has copied the strategy, to Cripe's knowledge. "It's onerous when you're looking at it from the outside," she says. "These are massive agreements, and every gyration of what could possibly go wrong has to be covered from a legal standpoint. If you haven't done it before, it takes a lot of time and attention."
So far, quality has not been a major issue, despite the difficulties of managing a remote facility. The Joint Commission has yet to deny the extension of a hospital's accreditation to a satellite, Hill says.
Lucile Packard would like to establish more satellites, but it's blocked by a California law that restricts hospitals from operating units more than 15 miles away from their main facilities.
California's 15-mile rule, enacted before computers and fax machines, was based on what was considered a reasonable distance for the transfer of records, according to hospital officials in the state.
"I also think there frankly was concern about a hospital's ability to truly manage and integrate and be responsible for operating a unit that was not in close proximity to the mother ship," says Thomas. Instead of satellites, Lucile Packard is pursuing joint ventures in some communities, which will be less lucrative for the teaching institution.
Lucile Packard expects friction as community hospitals and their physicians pressure it to keep sicker babies in satellites, rather than transferring them to the regional center. It has attempted to deal with the problem early on by establishing parameters for the types of cases that would be treated at satellites and for the volumes needed to increase the intensity of care.
"The community hospitals are under tremendous financial pressure, and the more babies they can keep locally, the more satisfied their patients are and the better off they are financially," Thomas says. "On the other hand, we've got to make the best decisions for the patient."