The baby boomers are coming. That's the rallying cry executives at one for-profit hospital chain have used to explain unusually strong volume growth at their hospitals in recent months. Observers say it may mark the beginning of a trend that manifests itself in the proliferation of services that cater to this consumer-oriented age group and that also brings cash into the coffers of the hospitals that provide those services.
During a recent telephone call with analysts, officials from Tenet Healthcare Corp. said they have begun to analyze volume growth by both services and age group. During the six-month period ended Nov. 30, 2000, volume at the company's hospitals rose 12% among 51- to 60-year-olds, the fastest growth of any age group. The group with the second-highest volume growth was 41- to 50-year-olds, whose admissions rose 7% from the prior-year period.
"These are post-World War II baby boomers," Thomas Mackey, chief operating officer of Santa Barbara, Calif.-based Tenet, said on the call. "We expect they will be using our hospitals in ever greater numbers in the years ahead, and our development has focused on treating the types of medical problems they're most likely to experience: cardiology, orthopedics, gynecology, oncology and neurology."
Tenet's optimism comes despite a recent failure by Universal Health Services to operate a women's hospital in Austin, Texas, based on a similar strategy (See story, this page).
Tenet's discussion of volume growth in this way appears to be the first time a for-profit hospital company has quantified its volume trends by age group to the public, said A.J. Rice, healthcare analyst at Merrill Lynch & Co. in New York.
Tenet spokesman Harry Anderson said the volume growth is amplified by the consumer-minded spirit of the baby boomer generation. The same demographic group that is buying luxury cars also demands luxury healthcare services.
"It is a consumer-oriented generation that seeks and demands quality care and services, and it is discriminating in how it approaches things," Anderson said. "We've done things about how we can make our hospitals more appealing to a generation that is more selective."
That includes market research on what these prospective patients want, replacing aging facilities with state-of-the-art hospitals that can provide the latest in technology and marketing services through local advertising campaigns, he said.
Anderson said Tenet is only beginning to notice the baby boomer effect but has been anticipating it and working it into operating initiatives for about two years. What Tenet is noticing is just the beginning of a wave that will continue for the next five to 10 years, he said.
Although it may have articulated the trend more publicly than other for-profit hospital chains, Tenet is not the only one trying to cater to boomers.
"We do believe the continuing aging of the baby boomers is altering the types of services hospitals will be providing," said Kirk Gorman, chief financial officer of Universal Health Services, a for-profit chain in King of Prussia, Pa. "We see growth in cardiology and oncology, which certainly would be associated with an older age group."
Gorman said the largest amounts of UHS' capital are going toward services such as oncology, cardiology, gynecology and orthopedics.
"We see more weekend-warrior injuries," he said. "And not only weekend warriors, but we do see knees and hips being replaced; there's more joint replacement activity than we've seen maybe 10 to 15 years ago."
UHS and Nashville-based HCA-The Healthcare Co. are taking the approach of beefing up their emergency rooms, because more patients are entering the health system that way. Gorman said this phenomenon, too, may be partially attributable to baby boomers, who are in a prime age bracket for cardiac arrest and other ailments that often are treated in the ER. Therefore, it makes sense to add more equipment to emergency rooms to handle cardiac arrest patients, he explained.
Jack Bovender, HCA's new president and chief executive officer, said cardiology, oncology and women's services are also HCA's biggest service areas. But instead of looking at demographic volume trends nationwide, HCA takes a market-by-market approach, he said.